This document contains questions and answers related to Assignment 1.

I received these
questions by email. For clarity, I have modified the question when needed. My answers are shown
in blue font.

Question 1

I am unclear on the question about 5-year high and low prices. Does this mean that we need to find
min and max prices from the whole year or do we have to find it from the market cap (like July 2017
– June 2018, July 2018 – June 2019, etc., separately)? My group members and I are having confusion
on the 5-year high and low price question. Could you tell us more specifically?

5-year high means highest price in five years. There should be one value for the high price and one
for the low price. It is not annual. For example, in Yahoo finance for Microsoft, the 52 week range is
52-week low ($132.52 and 52-week high ($246.13) –but this is based on daily price for the last 52
weeks. You are doing similar calculations, but this time it is the 5-year high and low based on
monthly prices over 5 years (i.e., you are calculating the 60-month high and 60-month low prices).

Question 2

1. For the calculations, when we get the final answer, can we put in the whole number or
include decimal points?. If we include decimal points, how many decimal places do we take
the numbers to?.

Since you are uploading the Excel file, please do not round. Please do not paste the values.
Use the cell references to where the calculation is done. Supposes you used =Max(range) to
compute the 5-year high and got the value 54.223, do not put this value in B15 of sheet
“Results.” Either put the formula itself in cell B15, or if you computed this value in other
place, please put the address of the cell there. For example, if you computed this value in cell
L22 of sheet “Data” put =Data!L22 in cell B15.

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Why? Because, if you got the value wrong, I would have no way of finding out what went
wrong and cannot give you partial marks.

2. For the graph, what title should we use?

The title is up to you.

3. Should we use the overall price information or just the five year market capitalization
information to find the high and low price?

For the high and low prices, you only use price, not market capitalization. Please see my answer to
Question 1.

Please note the following advice

1. First, you need to know what you have to do.

2. Secondly, once you figure out what you have to do, then you need to know how to do it.

It is said “A well-stated problem is half solved!”.

You may want to know, to save time or for operational expediency, “how to do it?”; and you
do it.
But such a strategy has problems; (i) you may do something right without knowing what you
did and (ii) you may not be able to adapt what you did to other similar situations.

Question 3

Me and my group members have a few more questions below that we would like to ask you.

1. How do we calculate the annual average return?. Is it by directly applying the formula
"stdev.s (all the highlighted return data")?.
You have downloaded 60 monthly returns (column F in the figure below) . Take the
average of these 60 returns using Excel function “=average()”. Then, annualize the
average monthly return by multiplying the monthly average by 12.

2. Which of the calculations need to be in percentage?

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 Annualized volatility and annualized average return have percentage representation.
You can leave them as fractions or express them as % using Excel formatting. Do not
multiply them by 100 to represent in percentage.
Express market capitalization in millions of dollars. Turnover will be in times, e.g.,
4.12 means 4.12 times.

Question 4

Wanted to ask for the assignment, how do we calculate the annual share turnover for part (b) of the
assignment?

The annual share turnover is the total number of shares traded in a year divided by the
number of shares outstanding at the end of the year. For example, if the 450 million shares
were traded in a year (this is the sum of the volumes from July 2017 to June 2018 for the year
July 2017 – June 2018) and the total number of shares outstanding is 100 million at the end
of the year (June 2018), then the annual share turnover is 450/100 = 4.50 times. Therefore,
turnover is expressed in “times” like PE (price/earnings) ratio. You can sum the shares
volume (this is the number of shares traded) for the 12 months in a particular year (e.g. July
2017 to June 2018) to get the annual number of shares traded. 1 Then, use the year-end
(June figure for each year), to get the number of shares outstanding. Sometimes, we use the
average number of shares outstanding – but for this Assignment use the year-end value.

Another issue is that the share volume (number of shares traded in a month) is expressed in
100 (hundred) shares, and the number of shares outstanding is in thousand shares.
Therefore, you need to multiply the share volume by 100 and shares outstanding by 1,000 to
get the actual number of shares. You can see the unit of the data by clicking the question
mark “?” next to the data when downloading data from WRDS as shown below.

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When I say particular year, I am not referring to calendar year. Here the year starts with July of a calendar
year and ends with June of the following calendar year.