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Excel Essentials

The document provides instructions for an Excel quiz involving monthly stock returns data from 2003-2015. It asks students to [1] generate a scatter plot comparing SPY and Amazon returns, calculate the trendline slope, R-squared, and Y-intercept, [2] determine which asset (SPY or RSP) had a higher Sharpe ratio based on annualized returns and standard deviations, [3] provide the Sharpe ratio for that asset, and [4] use the Solver tool to find the revenue-maximizing price for a coffee company.

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Wathek Al Zuaiby
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3K views3 pages

Excel Essentials

The document provides instructions for an Excel quiz involving monthly stock returns data from 2003-2015. It asks students to [1] generate a scatter plot comparing SPY and Amazon returns, calculate the trendline slope, R-squared, and Y-intercept, [2] determine which asset (SPY or RSP) had a higher Sharpe ratio based on annualized returns and standard deviations, [3] provide the Sharpe ratio for that asset, and [4] use the Solver tool to find the revenue-maximizing price for a coffee company.

Uploaded by

Wathek Al Zuaiby
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as TXT, PDF, TXT or read online on Scribd
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Please download the following workbook for the Excel Essentials Quiz.

Excel-Essentials-Quiz(1).xlsx
This spreadsheet contains monthly continuously compounded returns for two stock
indexes RSP and SPY and two individual stocks Amazon and Duke Energy for
the 12 years from May 2003 to May 2015.

Use Excels chart function to generate a scatter plot of SPY index monthly returns
(y axis) against Amazon monthly returns (x axis)

When you use trendline option for slope, R-squared, and the y-intercept, double-
check your results against the equivalent cell formula answers.

Question 1: What is the slope of the best-fit line (rounded to two decimal places)?

0.11
x
0.12
x
0.15 r

What is the coefficient of determination (R-squared)? Use the "rsq" Excel function
(Trendline in Excel may give an inaccurate value for R-squared).

0.18 r

What is the Y-intercept, in percent? Use the "trendline" but double-check against
the "intercept" function.

0.25% x

0.35% x

0.45% r

Answer Question 4 and 5 based on the information below:

The annual "Sharpe Ratio" is a metric that combines profitability and risk - it
measures units of profitability per unit of risk.

First calculate the difference between the annual return of a stock and the annual
return of a risk-free investment in government bonds. Second, divide that
difference by the annualized population standard deviation of returns of the stock.

For example, if the annual return of a stock is 10%, the annual risk-free bond
return is 2%, and the annualized population standard deviation of returns of the
stock is 16%, then the Sharpe Ratio = 8%/16% = 0.5.

For this problem, you can estimate the annualized standard deviation of returns by
multiplying your calculated value for the monthly population standard deviation of
returns by the square root of 12.

Question 4: Assuming the risk-free rate is 1.5% per year over the full 12-year
interval measured, which asset had the higher Sharpe ratio: SPY or RSP?
RSP r

For the asset you chose in Question 4, what was the Sharpe ratio? Round your
results to two decimal places.

0.56
x
0.50
x
0.48 x

In the month ending on which date did Amazon achieve the highest returns?

Note: Use "paste special" and choose "values and number formats" to keep return
values from changing.

September 1, 2010
x
October 1, 2009
x
April 2, 2007 r

What was the monthly return from the question above?

22.9%
x
43.27% r

What was Duke Energys return that same month?

0.51%
x

3.04%
x
1.13% r

Using the Solver plug-in (Solver Add-In) for Excel, answer Questions 9 and 10,
based on the information below:

Solver Add-In.xlsx
Between possible pricing of $5 per pound to $25 per pound, the quantity of coffee
Eggers Roast Coffee can sell each month is a linear function of the retail selling
price per pound. The linear function is (quantity sold in pounds) = (-400*(Price
per pound)) + 10,000.

Question 9: What is the revenue-maximizing selling price per pound for Eggers
Roast Coffee?

If this question is too challenging, there is another example below to review. This
can also be found in "Course Resources" as a quick reference.
Solver_optimization_example(1).xlsx

$5.00
x
$12.50 r

What is the monthly revenue at that price per pound? ( , indicates thousands)

$15,100

$40,000
x

$62,100 x

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