1. What were the betas of Ford, Toyota, and Honda?
Step 1: Calculate the risk premium (excess return) for each firm for every
month.
[Change cells : 5 5 $ 5]
[Select cells: G5:J5; In Home Tab select Fill – Right]
[Select cells: G5:J64; Ctrl-D]
G B F= –
2. In light of each firm’s exposure to the financial crisis in 2008-2009, does the
value for Ford compared to Honda and Toyota make sense to you?
3. What was the alpha of each firm?
Step 1: Recognize the equation for α, in expectations is:
( ) [ ( ) ]
s st ft s Mt ft
E r r E r ra b= – – –
( )
st ft
E r r–
Company: Ford Honda Toyota S&P
Alpha: -0.93 -1.44 0.45 0.00