A. Use the data given to calculate annual returns for Goodman, Landry, and the Market Index, and then calculate average returns over the five-year period. (Hint: Remember, returns are calculated by subtracting the beginning price from the ending price to get the capital gain or loss, adding the dividend to the capital gain or loss, and dividing the result by the beginning price. Assume that dividends are already included in the index. Also, you cannot calculate the rate of return for 2010 because you do not have 2009 data.) Data as given in the problem are shown below:
Goodman Industries Landry Incorporated Market Index
Year Stock Price Dividend Stock Price Dividend Includes Divs.
2016 $25.88 $1.73 $73.13 $4.50 17,495.97
2015 $22.13 $1.59 $78.45 $4.35 13,178.55
2014 $24.75 $1.50 $73.13 $4.13 13,019.97
2013 $16.13 $1.43 $85.88 $3.75 9,651.05
2012 $17.06 $1.35 $90.00 $3.38 8,403.42
2011 $11.44 $1.28 $83.63 $3.00 7,058.96
b. Calculate the standard deviation of the returns for Goodman, Landry, and the Market Index. (Hint: Use the sample standard deviation formula given in the chapter, which corresponds to the STDEV function in Excel.)
Use the function wizard to calculate the standard deviations.
Goodman Landry Index
Standard deviation of returns
c. Construct a scatter diagram graph that shows Goodman’s and Landry’ returns on the vertical axis and the Market Index’s returns on the horizontal axis.
It is easiest to make scatter diagrams with a data set that has the X-axis variable in the left column, so we reformat the returns data calculated above and show it just below.
Year Index Goodman Landry
2016 0.0% 0.0% 0.0%
2015 0.0% 0.0% 0.0%
2014 0.0% 0.0% 0.0%
2013 0.0% 0.0% 0.0%
2012 0.0% 0.0% 0.0%