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Risk and Return for a Four-Stock Portfolio

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Here are four publicly traded companies: Amazon.com, Dolby, Nokia, and Netflix.

Each compromises 25% of the portfolio which totals 100% for the four stocks. Calculate using EXCEL the Beta and expected return for the stocks. Show all calculations. Do not simply obtain Beta from online sources such as YAHOO! finance.

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Solution Summary

This solution shows step-by-step calculations in an Excel file to determine the beta and the expected return for stocks in Amazon, Dolby, Nokia and Netflix.

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Stock Risk Free Rate* +[ Beta *( Market Return** - Risk Free Rate* ) Expected Return***
Amazon (NASDAQ: AMZN) 6.03% 1.53 9.13% 6.03% 6.08%
Dolby (NYSE: DLB) 6.03% 1.14 9.13% 6.03% 6.07%
Nokia (NYSE: NOK) 6.03% 1.70 9.13% 6.03% 6.08%
Netflix (NASDAQ: NFLX) 6.03% 0.99 9.13% 6.03% 6.06%
* The returns on the 30-year bond is used
** to compute the Market Return, I used the weekly closing prices of the S&P 500 index from January 4, 2007 to May 18, 2009. I computed ...

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