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You are working for the CFO of AT&T. You collect stock return data from 1995 to...

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Finance

You are working for the CFO of AT&T. You collect stockreturn data from 1995 to 2016 (23 years of data): average return:9.9%; standard deviation: 23.1%; market average excess return:8.5%; market SD: 14.5%; average risk-free rate: 2.3%.

1. What was AT&T’s Sharpe ratio (the ratio of average excessreturn to standard deviation) over the period? What was themarket’s Sharpe ratio?

2. What is the standard error of the sample average AT&Treturn? Provide a 95% and 99% confidence interval.

3. You also look at the AT&T beta which is 0.4. IsAT&T’s beta above or below average?

4. If, over the next week, the market goes up by 2%, what do youexpect the AT&T stock return to be?

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Answer to Question 1 ATTs Sharpe ratio over the    See Answer
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