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Reducing Unsystematic Risk through industry diversification

Company Microsof 3M AT&T Amazon


Tickers MSFT MMM T AMZN
Volume (number of shares he 1000 600 400 500
Price (USD) $57.43 $177.39 $41.25 $805.75
Market Value $57,430 $106,434 $16,500 $402,875
Total Portfolio Value
weights 0.0709854531 0.1315560807 0.020394567 0.49796734
Beta (from yahoo finance) 1.36 0.966 0.723 1.022
Portfolio Beta

Scenario Assumption Mkt Con in Years Probability Year


Growth Greater than 2 5 0.5 (2015,2014,2012,2010,2006)
Normal 1 to 2 3 0.3 (2013,2011,2007)
Recession less than 1 2 0.2 (2009,2008)
Total years 10

Companies Microsof 3M AT&T Amazon


Scenario Return
Growth 10.45% 5.48% 12.05% 31.61%
Normal 17.43% 17.98% 3.62% 63.30%
Recession 5.31% 5.96% -16.54% 58.84%

Variance 0.0132287678
Standard Deviation 11.50%
Expected market return r (m) 9.19% 0.0919
Risk free rate r(f)(Treasury 1 1.582 0.01582

CAPM 9.83%
Apple
AAPL
2000
$112.90 http://data.worldbank.org/indicator/NY.GDP.
$225,800 Country Name
$809,039 Country Code
0.27909656 Indicator Name
1.209 Indicator Code
1.084719023 Year
1 2015
2 2014
015,2014,2012,2010,2006) 3 2013
013,2011,2007) 4 2012
5 2011
6 2010
7 2009
Apple 8 2008
Expected RetuProbabilit Total Expected Return 9 2007
27.11% 25.01% 0.5 36.19% 10 2006
54.82% 50.50% 0.3 2005
45.00% 42.68% 0.2 2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
1979
1978
1977
1976
1975
1974
1973
1972
1971
1970
1969
1968
1967
1966
1965
1964
1963
1962
1961
1960
1. expansion (increase in production and prices, low interest-rates)
2. crisis (stock exchanges crash and multiple bankruptcies of firms occur)
3. recession (drops in prices and in output, high interest-rates)
4. recovery (stocks recover because of the fall in prices and incomes)
/data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?locations=US
United States
USA http://www.1stock1.com/1stock1_224.htm
GDP growth (annual %)
NY.GDP.MKTP.KD.ZG MSFT
GDP growth (annual %) Market Condition BeginningPrice
Year EndingPrice
GainorLoss
2.4259705265 Growth 2006 26.15 29.86 3.71
2.4277956361 Growth 2007 29.86 35.6 5.74
1.4895249492 Normal 2008 35.6 19.44 -16.16
2.2240308539 Growth 2009 19.44 30.48 11.04
1.6014546725 Normal 2010 30.48 27.91 -2.57
2.5319206162 Growth 2011 27.91 25.96 -1.95
-2.7755295742 Recession 2012 25.96 26.71 0.75
-0.2916214587 Recession 2013 26.71 37.41 10.7
1.7785702397 Normal 2014 37.41 46.45 9.04
2.6666258261 Growth 2015 46.45 55.48 9.03
3.3452160633
3.7857428497 AMZN
2.8067759565 BeginningPrice
Year EndingPrice
GainorLoss
1.7861276875 2006 47.15 39.46 -7.69
0.9759818339 2007 39.46 92.64 53.18
4.0921764488 2008 92.64 51.28 -41.36
4.6851996084 2009 51.28 134.52 83.24
4.4499109633 2010 134.52 180 45.48
4.4870264932 2011 180 173.1 -6.9
3.7958812294 2012 173.1 250.87 77.77
2.7189757888 2013 250.87 398.79 147.92
4.0376434249 2014 398.79 310.35 -88.44
2.7458567189 2015 310.35 675.89 365.54
3.5553961477
-0.0740845307
1.9193702974
3.680524033
4.2039719794
3.4617476919
3.5116144991
4.2387375208
7.2590869594
4.6324571812
-1.910891068
2.5944703882
-0.2445962252
3.1756907501
5.5616849289
4.6085974065
5.3860900508
-0.1976785365
-0.5171545622
5.6431248476
5.2632627762
3.2954767284
3.2068072575
3.1
4.8
2.5
6.5
6.4
5.8
4.4
6.1
2.3
interest-rates)
ptcies of firms occur)

ces and incomes)

ck1_224.htm

MMM AT&T
PercentGainorLoss BeginningPrice
Year EndingPrice
GainorLoss
PercentGainorLoss BeginningPrice
Year
14.19% 2006 77.5 77.93 0.43 0.55% 2006 24.49
19.22% 2007 77.93 84.32 6.39 8.20% 2007 35.75
-46.17% 2008 84.32 57.54 -26.78 -31.76% 2008 41.56
56.79% 2009 57.54 82.67 25.13 43.67% 2009 28.5
-8.43% 2010 82.67 86.3 3.63 4.39% 2010 28.03
-6.99% 2011 86.3 81.73 -4.57 -5.30% 2011 29.38
2.89% 2012 81.73 92.85 11.12 13.61% 2012 30.24
40.06% 2013 92.85 140.25 47.4 51.05% 2013 33.71
24.16% 2014 140.25 164.32 24.07 17.16% 2014 35.16
19.44% 2015 164.32 150.64 -13.68 -8.33% 2015 33.59

APPL
PercentGainorLoss BeginningPrice
Year EndingPrice
GainorLoss
PercentGainorLoss
-16.31% 2006 71.89 84.84 12.95 18.01%
134.77% 2007 84.84 198.08 113.24 133.47%
-44.65% 2008 198.08 85.35 -112.73 -56.91%
162.32% 2009 85.35 210.732 125.382 146.90%
33.81% 2010 210.732 322.56 111.828 53.07%
-3.83% 2011 322.56 405 82.44 25.56%
44.93% 2012 405 532.17 127.17 31.40%
58.96% 2013 532.17 561.02 28.85 5.42%
-22.18% 2014 561.02 772.66* 211.64 37.72%
117.78% 2015 110.38 105.26 -5.12 -4.64%
EndingPrice
GainorLoss
PercentGainorLoss
35.75 11.26 45.98%
41.56 5.81 16.25%
28.5 -13.06 -31.42%
28.03 -0.47 -1.65%
29.38 1.35 4.82%
30.24 0.86 2.93%
33.71 3.47 11.47%
35.16 1.45 4.30%
33.59 -1.57 -4.47%
34.41 0.82 2.44%
Source http://www.bloomberg.com/quote/