Assignment 3 Specification Financial Modelling DSC2604 Semester 1," serves as a comprehensive guide to the requirements and expectations for the third assignment in the Financial Modelling course offered in Semester 1 of the DSC2604 module
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Good luck!
To calculate the expected daily rate of return for each of the three stocks, we first need to
calculate the daily returns for each stock. Daily returns can be calculated using the formula:
We will use the closing price for each stock for each day, as provided in the table.
Next, we will calculate the mean and standard deviation of the daily returns for each stock,
assuming a normal distribution.
To calculate these values in Excel:
1. Calculate the daily returns for each stock:
• Create a new column for each stock next to the closing price column.
• In the first cell of the new column, enter the formula: =(B2-B1)/B1*100 (where B is the
column for the closing prices of the first stock)
• Copy the formula down for all the rows in the column.
• Repeat this process for each stock.
2. Calculate the mean and standard deviation of the daily returns for each stock:
• Use the AVERAGE function to calculate the mean of the daily returns for each stock.
• Use the STDEV function to calculate the standard deviation of the daily returns for each
stock.
Here are the results:
Expected daily rate of return (expressed as a percentage, rounded to three decimal places):
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