Investment Strategy Analysis

This assignment involves analyzing a proposed investment strategy. It requires calculating potential returns and risks associated with investing in the stock market versus putting funds into Kellogg's company. The student must determine the ideal allocation of borrowed funds between these two options to maximize return while minimizing risk. Different scenarios are presented, each with varying percentages allocated to each investment, allowing for a comparative analysis of potential outcomes.

Running head: INTRODUCTION TO FINANCE
Introduction to Finance
Name of the Student:
Name of the University:
Author’s Note:

1INTRODUCTION TO FINANCE
Table of Contents
Answer to Question 1:.....................................................................................................................2
Requirement a:.............................................................................................................................2
Requirement b,i:..........................................................................................................................2
Requirement b.ii:.........................................................................................................................2
Requirement c:.............................................................................................................................2
Requirement d.i:..........................................................................................................................3
Requirement d.ii:.........................................................................................................................3
Requirement d.iii:........................................................................................................................4
Requirement e:.............................................................................................................................4
Requirement f:.............................................................................................................................4
Answer to Question 2:.....................................................................................................................5
Requirement 2.i:..........................................................................................................................5
Requirement ii:............................................................................................................................9
Requirement iii:.........................................................................................................................10
Bibliography:.................................................................................................................................16

2INTRODUCTION TO FINANCE
Answer to Question 1:
Requirement a:
Particulars 2016 2017 2018 2019 2020
BVPS, start of year 14.40 15.91 17.58 19.43 21.47
EPS 2.16 2.39 2.64 2.91 3.22
ROE 0.15 0.15 0.15 0.15 0.15
Payout ratio 0.30 0.30 0.30 0.30 0.30
Dividends per share (DIV) 0.65 0.72 0.79 0.87 0.97
Retained earnings 1.512 1.67 1.85 2.04 2.25
BVPS, end of year 15.91 17.58 19.43 21.47 23.72
Requirement b,i:
Particulars 2020 2021 2022 2023 2024
BVPS, start of year 21.47 23.72 25.38 27.16 29.06
EPS 3.22 2.37 2.54 2.72 2.91
ROE 0.15 0.10 0.10 0.10 0.10
Payout ratio 0.30 0.30 0.30 0.30 0.30
Dividends per share (DIV) 0.97 0.71 0.76 0.81 0.87
Retained earnings 2.25 1.66 1.78 1.90 2.03
BVPS, end of year 23.72 25.38 27.16 29.06 31.10
Requirement b.ii:
In the long run, the ROE becomes equal to the cost of capital so that the present value of
future residual income becomes zero and the intrinsic value of the stock would equal to BV of
the stock.
Requirement c:
Particulars 2016 2017 2018 2019 2020
Period 1 2 3 4 5

3INTRODUCTION TO FINANCE
Cost of Capital 10% 10% 10% 10% 10%
Expected Dividend 0.65 0.72 0.79 0.87 0.97
PV of Dividends 0.59 0.59 0.59 0.60 0.60
Total PV of Expected
Dividends 2.97
Requirement d.i:
Particulars Amount
Expected Dividend on 2024 0.87
Expected Dividend on 2022 0.76
Period 2
Dividend Growth Rate under
CAGR 0.07
ROE 0.10
Payout Ratio 0.30
Dividend Growth Rate under
General Method 0.07
Requirement d.ii:
Particulars Amount
Dividend on 2020 0.97
Dividend Growth Rate 0.07
Expected Dividend 1.03
Cost of Capital 0.1
PV of Future Dividends on
2020 34.46
PV of Future Dividends on
2015 21.40

4INTRODUCTION TO FINANCE
Requirement d.iii:
Particulars Amount
Enterprise Value 23.72
ROE 0.1
EBITDA
2.37232
3
Terminal Value 10
Requirement e:
Particulars Amount
Total PV of Expected
Dividends 2.97
PV of Future Dividends on 2015 21.40
Market Share Price 24.37
Requirement f:
Particulars 2016 2017 2018 2019 2020
1 2 3 4 5
BVPS, start of year 14.40 15.91 17.03 18.22 19.49
EPS 1.44 1.59 1.70 1.82 1.95
ROE 0.10 0.10 0.10 0.10 0.10
Payout ratio 0.30 0.30 0.30 0.30 0.30
Dividends per share (DIV) 0.65 0.48 0.51 0.55 0.58
Retained earnings 1.512 1.11 1.19 1.28 1.36
BVPS, end of year 15.91 17.03 18.22 19.49 20.86
Cost of Capital 0.10 0.10 0.10 0.10 0.10
PV of Dividends 0.59 0.39 0.38 0.37 0.36
Total PV of Dividends 2.10
Difference with Part c 0.87

5INTRODUCTION TO FINANCE
Answer to Question 2:
Requirement 2.i:
Month
S&P
500
Index
S&P 500
Returns Month
KELLOGG
Share
Price
Kellogg
Returns
12/31/200
0
1320.2
8
12/31/200
0 26.25
1/31/2001
1366.0
1 -3.46% 1/31/2001 26.2 0.19%
2/28/2001
1239.9
4 9.23% 2/28/2001 26.59 -1.49%
3/30/2001
1160.3
3 6.42% 3/30/2001 27.03 -1.65%
4/30/2001
1249.4
6 -7.68% 4/30/2001 25.5 5.66%
5/31/2001
1255.8
2 -0.51% 5/31/2001 26.72 -4.78%
6/29/2001
1224.4
2 2.50% 6/29/2001 29 -8.53%
7/31/2001
1211.2
3 1.08% 7/31/2001 30.07 -3.69%
8/31/2001
1133.5
8 6.41% 8/31/2001 31.99 -6.39%
9/28/2001
1040.9
4 8.17% 9/28/2001 30 6.22%
10/31/200
1
1059.7
8 -1.81%
10/31/200
1 30.5 -1.67%
11/30/200
1
1139.4
5 -7.52%
11/30/200
1 29.49 3.31%
12/31/200
1
1148.0
8 -0.76%
12/31/200
1 30.1 -2.07%
1/31/2002 1130.2 1.56% 1/31/2002 30.86 -2.52%
2/28/2002
1106.7
3 2.08% 2/28/2002 34.55 -11.96%
3/29/2002
1147.3
9 -3.67% 3/29/2002 33.57 2.84%
4/30/2002
1076.9
2 6.14% 4/30/2002 35.92 -7.00%
5/31/2002
1067.1
4 0.91% 5/31/2002 36.7 -2.17%
6/28/2002 989.81 7.25% 6/28/2002 35.86 2.29%
7/31/2002 911.62 7.90% 7/31/2002 34.44 3.96%
8/30/2002 916.07 -0.49% 8/30/2002 32.16 6.62%

6INTRODUCTION TO FINANCE
9/30/2002 815.28 11.00% 9/30/2002 33.25 -3.39%
10/31/200
2 885.76 -8.64%
10/31/200
2 31.86 4.18%
11/29/200
2 936.31 -5.71%
11/29/200
2 33.37 -4.74%
12/31/200
2 879.82 6.03%
12/31/200
2 34.27 -2.70%
1/31/2003 855.7 2.74% 1/31/2003 33.4 2.54%
2/28/2003 841.15 1.70% 2/28/2003 29.57 11.47%
3/31/2003 848.18 -0.84% 3/31/2003 30.65 -3.65%
4/30/2003 916.92 -8.10% 4/30/2003 32.74 -6.82%
5/30/2003 963.59 -5.09% 5/30/2003 35.2 -7.51%
6/30/2003 974.5 -1.13% 6/30/2003 34.37 2.36%
7/31/2003 990.31 -1.62% 7/31/2003 34.33 0.12%
8/29/2003
1008.0
1 -1.79% 8/29/2003 33.53 2.33%
9/30/2003 995.97 1.19% 9/30/2003 33.35 0.54%
10/31/200
3
1050.7
1 -5.50%
10/31/200
3 33.13 0.66%
11/28/200
3 1058.2 -0.71%
11/28/200
3 35.77 -7.97%
12/31/200
3
1111.9
2 -5.08%
12/31/200
3 38.08 -6.46%
1/30/2004
1131.1
3 -1.73% 1/30/2004 37.81 0.71%
2/27/2004
1144.9
4 -1.22% 2/27/2004 39.49 -4.44%
3/31/2004
1126.2
1 1.64% 3/31/2004 39.24 0.63%
4/30/2004 1107.3 1.68% 4/30/2004 42.9 -9.33%
5/31/2004
1120.6
8 -1.21% 5/31/2004 42.4 1.17%
6/30/2004
1140.8
4 -1.80% 6/30/2004 41.85 1.30%
7/30/2004
1101.7
2 3.43% 7/30/2004 41.66 0.45%
8/31/2004
1104.2
4 -0.23% 8/31/2004 41.98 -0.77%
9/30/2004
1114.5
8 -0.94% 9/30/2004 42.66 -1.62%
10/29/200
4 1130.2 -1.40%
10/29/200
4 43 -0.80%
11/30/200
4
1173.8
2 -3.86%
11/30/200
4 43.7 -1.63%
12/31/200
4
1211.9
2 -3.25%
12/31/200
4 44.66 -2.20%

7INTRODUCTION TO FINANCE
1/31/2005
1181.2
7 2.53% 1/31/2005 44.64 0.04%
2/28/2005 1203.6 -1.89% 2/28/2005 44 1.43%
3/31/2005
1180.5
9 1.91% 3/31/2005 43.27 1.66%
4/29/2005
1156.8
5 2.01% 4/29/2005 44.95 -3.88%
5/31/2005 1191.5 -3.00% 5/31/2005 45.49 -1.20%
6/30/2005
1191.3
3 0.01% 6/30/2005 44.44 2.31%
7/29/2005
1234.1
8 -3.60% 7/29/2005 45.31 -1.96%
8/31/2005
1220.3
3 1.12% 8/31/2005 45.33 -0.04%
9/30/2005
1228.8
1 -0.69% 9/30/2005 46.13 -1.76%
10/31/200
5
1207.0
1 1.77%
10/31/200
5 44.17 4.25%
11/30/200
5
1249.4
8 -3.52%
11/30/200
5 44.07 0.23%
12/30/200
5
1248.2
9 0.10%
12/30/200
5 43.22 1.93%
1/31/2006
1280.0
8 -2.55% 1/31/2006 42.9 0.74%
2/28/2006
1280.6
6 -0.05% 2/28/2006 44.31 -3.29%
3/31/2006
1294.8
3 -1.11% 3/31/2006 44.04 0.61%
4/28/2006
1310.6
1 -1.22% 4/28/2006 46.31 -5.15%
5/31/2006
1270.0
9 3.09% 5/31/2006 47.1 -1.71%
6/30/2006 1270.2 -0.01% 6/30/2006 48.43 -2.82%
7/31/2006
1276.6
6 -0.51% 7/31/2006 48.17 0.54%
8/31/2006
1303.8
2 -2.13% 8/31/2006 50.7 -5.25%
9/29/2006
1335.8
5 -2.46% 9/29/2006 49.52 2.33%
10/31/200
6
1377.9
4 -3.15%
10/31/200
6 50.31 -1.60%
11/30/200
6
1400.6
3 -1.65%
11/30/200
6 49.78 1.05%
12/29/200
6 1418.3 -1.26%
12/29/200
6 50.06 -0.56%
1/31/2007 1438.2 -1.41% 1/31/2007 49.27 1.58%

8INTRODUCTION TO FINANCE
4
2/28/2007
1406.8
2 2.18% 2/28/2007 49.84 -1.16%
3/30/2007
1420.8
6 -1.00% 3/30/2007 51.43 -3.19%
4/30/2007
1482.3
7 -4.33% 4/30/2007 52.91 -2.88%
5/31/2007
1530.6
2 -3.25% 5/31/2007 53.98 -2.02%
6/29/2007
1503.3
5 1.78% 6/29/2007 51.79 4.06%
7/31/2007
1455.2
7 3.20% 7/31/2007 51.81 -0.04%
8/31/2007
1473.9
9 -1.29% 8/31/2007 54.93 -6.02%
9/28/2007
1526.7
5 -3.58% 9/28/2007 56 -1.95%
10/31/200
7
1549.3
8 -1.48%
10/31/200
7 52.79 5.73%
11/30/200
7
1481.1
4 4.40%
11/30/200
7 54.04 -2.37%
12/31/200
7
1468.3
5 0.86%
12/31/200
7 52.43 2.98%
1/31/2008
1378.5
5 6.12% 1/31/2008 47.8 8.83%
2/29/2008
1330.6
3 3.48% 2/29/2008 50.72 -6.11%
3/31/2008 1322.7 0.60% 3/31/2008 52.56 -3.63%
4/30/2008
1385.5
9 -4.75% 4/30/2008 51.17 2.64%
5/30/2008
1400.3
8 -1.07% 5/30/2008 51.81 -1.25%
6/30/2008 1280 8.60% 6/30/2008 48.02 7.32%
7/31/2008
1267.3
8 0.99% 7/31/2008 53.06 -10.50%
8/29/2008
1282.8
3 -1.22% 8/29/2008 54.44 -2.60%
9/30/2008
1166.3
6 9.08% 9/30/2008 56.1 -3.05%
10/31/200
8 968.75 16.94%
10/31/200
8 50.42 10.12%
11/28/200
8 896.24 7.48%
11/28/200
8 43.43 13.86%
12/31/200
8 903.25 -0.78%
12/31/200
8 43.85 -0.97%
1/30/2009 825.88 8.57% 1/30/2009 43.69 0.36%

9INTRODUCTION TO FINANCE
2/27/2009 735.09 10.99% 2/27/2009 38.92 10.92%
3/31/2009 797.87 -8.54% 3/31/2009 36.63 5.88%
4/30/2009 872.81 -9.39% 4/30/2009 42.11 -14.96%
5/29/2009 919.14 -5.31% 5/29/2009 43.25 -2.71%
6/30/2009 919.32 -0.02% 6/30/2009 46.57 -7.68%
7/31/2009 987.48 -7.41% 7/31/2009 47.5 -2.00%
8/31/2009
1020.6
2 -3.36% 8/31/2009 47.09 0.86%
9/30/2009
1057.0
8 -3.57% 9/30/2009 49.23 -4.54%
10/30/200
9
1036.1
9 1.98%
10/30/200
9 51.54 -4.69%
11/30/200
9
1095.6
3 -5.74%
11/30/200
9 52.58 -2.02%
12/31/200
9 1115.1 -1.78%
12/31/200
9 53.2 -1.18%
1/29/2010
1073.8
7 3.70% 1/29/2010 54.42 -2.29%
2/26/2010
1104.4
9 -2.85% 2/26/2010 52.15 4.17%
3/31/2010
1169.4
3 -5.88% 3/31/2010 53.43 -2.45%
4/30/2010
1186.6
9 -1.48% 4/30/2010 54.94 -2.83%
5/31/2010
1089.4
1 8.20% 5/31/2010 53.43 2.75%
6/30/2010
1030.7
1 5.39% 6/30/2010 50.3 5.86%
7/30/2010 1101.6 -6.88% 7/30/2010 50.05 0.50%
8/31/2010
1049.3
3 4.74% 8/31/2010 49.68 0.74%
9/30/2010 1141.2 -8.76% 9/30/2010 50.51 -1.67%
10/29/201
0
1183.2
6 -3.69%
10/29/201
0 50.26 0.49%
11/30/201
0
1180.5
5 0.23%
11/30/201
0 49.23 2.05%
12/31/201
0
1257.6
4 -6.53%
12/31/201
0 51.08 -3.76%
1/31/2011
1286.1
2 -2.26% 1/31/2011 50.3 1.53%
2/28/2011
1327.2
2 -3.20% 2/28/2011 53.56 -6.48%
3/31/2011
1325.8
3 0.10% 3/31/2011 53.98 -0.78%
4/29/2011
1363.6
1 -2.85% 4/29/2011 57.27 -6.09%

10INTRODUCTION TO FINANCE
5/31/2011 1345.2 1.35% 5/31/2011 56.99 0.49%
6/30/2011
1320.6
4 1.83% 6/30/2011 55.32 2.93%
7/29/2011
1292.2
8 2.15% 7/29/2011 55.78 -0.83%
8/31/2011
1218.8
9 5.68% 8/31/2011 54.32 2.62%
9/30/2011
1131.4
2 7.18% 9/30/2011 53.19 2.08%
10/31/201
1 1253.3 -10.77%
10/31/201
1 54.21 -1.92%
11/30/201
1
1246.9
6 0.51%
11/30/201
1 49.16 9.32%
12/30/201
1 1257.6 -0.85%
12/30/201
1 50.57 -2.87%
1/31/2012
1312.4
1 -4.36% 1/31/2012 49.52 2.08%
2/29/2012
1365.6
8 -4.06% 2/29/2012 52.35 -5.71%
3/30/2012
1408.4
7 -3.13% 3/30/2012 53.63 -2.45%
4/30/2012
1397.9
1 0.75% 4/30/2012 50.57 5.71%
5/31/2012
1310.3
3 6.27% 5/31/2012 48.78 3.54%
6/29/2012
1362.1
6 -3.96% 6/29/2012 49.33 -1.13%
7/31/2012
1379.3
2 -1.26% 7/31/2012 47.7 3.30%
8/31/2012
1406.5
8 -1.98% 8/31/2012 50.65 -6.18%
9/28/2012
1440.6
7 -2.42% 9/28/2012 51.66 -1.99%
10/31/201
2
1412.1
6 1.98%
10/31/201
2 52.32 -1.28%
11/30/201
2
1416.1
8 -0.28%
11/30/201
2 55.46 -6.00%
12/31/201
2
1426.1
9 -0.71%
12/31/201
2 55.85 -0.70%
1/31/2013
1498.1
1 -5.04% 1/31/2013 58.5 -4.74%
2/28/2013
1514.6
8 -1.11% 2/28/2013 60.5 -3.42%
3/29/2013
1569.1
9 -3.60% 3/29/2013 64.43 -6.50%
4/30/2013
1597.5
7 -1.81% 4/30/2013 65.04 -0.95%

11INTRODUCTION TO FINANCE
5/31/2013
1630.7
4 -2.08% 5/31/2013 62.05 4.60%
6/28/2013
1606.2
8 1.50% 6/28/2013 64.23 -3.51%
7/31/2013
1685.7
2 -4.95% 7/31/2013 66.24 -3.13%
8/30/2013
1632.9
7 3.13% 8/30/2013 60.71 8.35%
9/30/2013
1681.5
5 -2.97% 9/30/2013 58.73 3.26%
10/31/201
3
1756.5
4 -4.46%
10/31/201
3 63.25 -7.70%
11/29/201
3
1805.8
1 -2.80%
11/29/201
3 60.64 4.13%
12/31/201
3
1848.3
6 -2.36%
12/31/201
3 61.07 -0.71%
1/31/2014
1782.5
9 3.56% 1/31/2014 57.98 5.06%
2/28/2014
1859.4
5 -4.31% 2/28/2014 60.69 -4.67%
3/31/2014
1872.3
3 -0.69% 3/31/2014 62.71 -3.33%
4/30/2014
1883.9
5 -0.62% 4/30/2014 66.83 -6.57%
5/30/2014
1923.5
7 -2.10% 5/30/2014 68.98 -3.22%
6/30/2014
1960.2
3 -1.91% 6/30/2014 65.7 4.76%
7/31/2014
1930.6
7 1.51% 7/31/2014 59.83 8.93%
8/29/2014
2003.3
7 -3.77% 8/29/2014 64.97 -8.59%
9/30/2014
1972.2
8 1.55% 9/30/2014 61.6 5.19%
10/31/201
4
2018.0
5 -2.32%
10/31/201
4 63.96 -3.83%
11/28/201
4
2067.5
6 -2.45%
11/28/201
4 66.25 -3.58%
12/31/201
4 2058.9 0.42%
12/31/201
4 65.44 1.22%
1/30/2015
1994.9
9 3.10% 1/30/2015 65.58 -0.21%
2/27/2015 2104.5 -5.49% 2/27/2015 64.48 1.68%
3/31/2015
2067.8
9 1.74% 3/31/2015 65.95 -2.28%
4/30/2015
2085.5
1 -0.85% 4/30/2015 63.33 3.97%

12INTRODUCTION TO FINANCE
5/29/2015
2107.3
9 -1.05% 5/29/2015 62.77 0.88%
6/30/2015
2063.1
1 2.10% 6/30/2015 62.7 0.11%
7/31/2015
2103.8
4 -1.97% 7/31/2015 66.17 -5.53%
8/31/2015
1972.1
8 6.26% 8/31/2015 66.28 -0.17%
9/30/2015
1920.0
3 2.64% 9/30/2015 66.55 -0.41%
Beta 0.301
Requirement ii:
Particulars Amount
Market Return 12%
Risk Free Return 5%
Beta of Kellogs 0.301
Expected Rate of
Return 7.11%
Requirement iii:
Month
S&P
500
Index
S&P 500
Returns Month
KELLOGG
Share
Price
Kellogg
Returns
12/31/2000
1320.2
8
12/31/200
0 26.25
1/31/2001
1366.0
1 -3.46% 1/31/2001 26.2 0.19%
2/28/2001
1239.9
4 9.23% 2/28/2001 26.59 -1.49%
3/30/2001
1160.3
3 6.42% 3/30/2001 27.03 -1.65%
4/30/2001
1249.4
6 -7.68% 4/30/2001 25.5 5.66%
5/31/2001
1255.8
2 -0.51% 5/31/2001 26.72 -4.78%
6/29/2001 1224.4 2.50% 6/29/2001 29 -8.53%

13INTRODUCTION TO FINANCE
2
7/31/2001
1211.2
3 1.08% 7/31/2001 30.07 -3.69%
8/31/2001
1133.5
8 6.41% 8/31/2001 31.99 -6.39%
9/28/2001
1040.9
4 8.17% 9/28/2001 30 6.22%
10/31/2001
1059.7
8 -1.81%
10/31/200
1 30.5 -1.67%
11/30/2001
1139.4
5 -7.52%
11/30/200
1 29.49 3.31%
12/31/2001
1148.0
8 -0.76%
12/31/200
1 30.1 -2.07%
1/31/2002 1130.2 1.56% 1/31/2002 30.86 -2.52%
2/28/2002
1106.7
3 2.08% 2/28/2002 34.55 -11.96%
3/29/2002
1147.3
9 -3.67% 3/29/2002 33.57 2.84%
4/30/2002
1076.9
2 6.14% 4/30/2002 35.92 -7.00%
5/31/2002
1067.1
4 0.91% 5/31/2002 36.7 -2.17%
6/28/2002 989.81 7.25% 6/28/2002 35.86 2.29%
7/31/2002 911.62 7.90% 7/31/2002 34.44 3.96%
8/30/2002 916.07 -0.49% 8/30/2002 32.16 6.62%
9/30/2002 815.28 11.00% 9/30/2002 33.25 -3.39%
10/31/2002 885.76 -8.64%
10/31/200
2 31.86 4.18%
11/29/2002 936.31 -5.71%
11/29/200
2 33.37 -4.74%
12/31/2002 879.82 6.03%
12/31/200
2 34.27 -2.70%
1/31/2003 855.7 2.74% 1/31/2003 33.4 2.54%
2/28/2003 841.15 1.70% 2/28/2003 29.57 11.47%
3/31/2003 848.18 -0.84% 3/31/2003 30.65 -3.65%
4/30/2003 916.92 -8.10% 4/30/2003 32.74 -6.82%
5/30/2003 963.59 -5.09% 5/30/2003 35.2 -7.51%
6/30/2003 974.5 -1.13% 6/30/2003 34.37 2.36%
7/31/2003 990.31 -1.62% 7/31/2003 34.33 0.12%
8/29/2003
1008.0
1 -1.79% 8/29/2003 33.53 2.33%
9/30/2003 995.97 1.19% 9/30/2003 33.35 0.54%
10/31/2003
1050.7
1 -5.50%
10/31/200
3 33.13 0.66%
11/28/2003 1058.2 -0.71%
11/28/200
3 35.77 -7.97%

14INTRODUCTION TO FINANCE
12/31/2003
1111.9
2 -5.08%
12/31/200
3 38.08 -6.46%
1/30/2004
1131.1
3 -1.73% 1/30/2004 37.81 0.71%
2/27/2004
1144.9
4 -1.22% 2/27/2004 39.49 -4.44%
3/31/2004
1126.2
1 1.64% 3/31/2004 39.24 0.63%
4/30/2004 1107.3 1.68% 4/30/2004 42.9 -9.33%
5/31/2004
1120.6
8 -1.21% 5/31/2004 42.4 1.17%
6/30/2004
1140.8
4 -1.80% 6/30/2004 41.85 1.30%
7/30/2004
1101.7
2 3.43% 7/30/2004 41.66 0.45%
8/31/2004
1104.2
4 -0.23% 8/31/2004 41.98 -0.77%
9/30/2004
1114.5
8 -0.94% 9/30/2004 42.66 -1.62%
10/29/2004 1130.2 -1.40%
10/29/200
4 43 -0.80%
11/30/2004
1173.8
2 -3.86%
11/30/200
4 43.7 -1.63%
12/31/2004
1211.9
2 -3.25%
12/31/200
4 44.66 -2.20%
1/31/2005
1181.2
7 2.53% 1/31/2005 44.64 0.04%
2/28/2005 1203.6 -1.89% 2/28/2005 44 1.43%
3/31/2005
1180.5
9 1.91% 3/31/2005 43.27 1.66%
4/29/2005
1156.8
5 2.01% 4/29/2005 44.95 -3.88%
5/31/2005 1191.5 -3.00% 5/31/2005 45.49 -1.20%
6/30/2005
1191.3
3 0.01% 6/30/2005 44.44 2.31%
7/29/2005
1234.1
8 -3.60% 7/29/2005 45.31 -1.96%
8/31/2005
1220.3
3 1.12% 8/31/2005 45.33 -0.04%
9/30/2005
1228.8
1 -0.69% 9/30/2005 46.13 -1.76%
10/31/2005
1207.0
1 1.77%
10/31/200
5 44.17 4.25%
11/30/2005
1249.4
8 -3.52%
11/30/200
5 44.07 0.23%
12/30/2005 1248.2 0.10% 12/30/200 43.22 1.93%

15INTRODUCTION TO FINANCE
9 5
1/31/2006
1280.0
8 -2.55% 1/31/2006 42.9 0.74%
2/28/2006
1280.6
6 -0.05% 2/28/2006 44.31 -3.29%
3/31/2006
1294.8
3 -1.11% 3/31/2006 44.04 0.61%
4/28/2006
1310.6
1 -1.22% 4/28/2006 46.31 -5.15%
5/31/2006
1270.0
9 3.09% 5/31/2006 47.1 -1.71%
6/30/2006 1270.2 -0.01% 6/30/2006 48.43 -2.82%
7/31/2006
1276.6
6 -0.51% 7/31/2006 48.17 0.54%
8/31/2006
1303.8
2 -2.13% 8/31/2006 50.7 -5.25%
9/29/2006
1335.8
5 -2.46% 9/29/2006 49.52 2.33%
10/31/2006
1377.9
4 -3.15%
10/31/200
6 50.31 -1.60%
11/30/2006
1400.6
3 -1.65%
11/30/200
6 49.78 1.05%
12/29/2006 1418.3 -1.26%
12/29/200
6 50.06 -0.56%
1/31/2007
1438.2
4 -1.41% 1/31/2007 49.27 1.58%
2/28/2007
1406.8
2 2.18% 2/28/2007 49.84 -1.16%
3/30/2007
1420.8
6 -1.00% 3/30/2007 51.43 -3.19%
4/30/2007
1482.3
7 -4.33% 4/30/2007 52.91 -2.88%
5/31/2007
1530.6
2 -3.25% 5/31/2007 53.98 -2.02%
6/29/2007
1503.3
5 1.78% 6/29/2007 51.79 4.06%
7/31/2007
1455.2
7 3.20% 7/31/2007 51.81 -0.04%
8/31/2007
1473.9
9 -1.29% 8/31/2007 54.93 -6.02%
9/28/2007
1526.7
5 -3.58% 9/28/2007 56 -1.95%
10/31/2007
1549.3
8 -1.48%
10/31/200
7 52.79 5.73%
11/30/2007
1481.1
4 4.40%
11/30/200
7 54.04 -2.37%
12/31/2007 1468.3 0.86% 12/31/200 52.43 2.98%

16INTRODUCTION TO FINANCE
5 7
1/31/2008
1378.5
5 6.12% 1/31/2008 47.8 8.83%
2/29/2008
1330.6
3 3.48% 2/29/2008 50.72 -6.11%
3/31/2008 1322.7 0.60% 3/31/2008 52.56 -3.63%
4/30/2008
1385.5
9 -4.75% 4/30/2008 51.17 2.64%
5/30/2008
1400.3
8 -1.07% 5/30/2008 51.81 -1.25%
6/30/2008 1280 8.60% 6/30/2008 48.02 7.32%
7/31/2008
1267.3
8 0.99% 7/31/2008 53.06 -10.50%
8/29/2008
1282.8
3 -1.22% 8/29/2008 54.44 -2.60%
9/30/2008
1166.3
6 9.08% 9/30/2008 56.1 -3.05%
10/31/2008 968.75 16.94%
10/31/200
8 50.42 10.12%
11/28/2008 896.24 7.48%
11/28/200
8 43.43 13.86%
12/31/2008 903.25 -0.78%
12/31/200
8 43.85 -0.97%
1/30/2009 825.88 8.57% 1/30/2009 43.69 0.36%
2/27/2009 735.09 10.99% 2/27/2009 38.92 10.92%
3/31/2009 797.87 -8.54% 3/31/2009 36.63 5.88%
4/30/2009 872.81 -9.39% 4/30/2009 42.11 -14.96%
5/29/2009 919.14 -5.31% 5/29/2009 43.25 -2.71%
6/30/2009 919.32 -0.02% 6/30/2009 46.57 -7.68%
7/31/2009 987.48 -7.41% 7/31/2009 47.5 -2.00%
8/31/2009
1020.6
2 -3.36% 8/31/2009 47.09 0.86%
9/30/2009
1057.0
8 -3.57% 9/30/2009 49.23 -4.54%
10/30/2009
1036.1
9 1.98%
10/30/200
9 51.54 -4.69%
11/30/2009
1095.6
3 -5.74%
11/30/200
9 52.58 -2.02%
12/31/2009 1115.1 -1.78%
12/31/200
9 53.2 -1.18%
1/29/2010
1073.8
7 3.70% 1/29/2010 54.42 -2.29%
2/26/2010
1104.4
9 -2.85% 2/26/2010 52.15 4.17%
3/31/2010
1169.4
3 -5.88% 3/31/2010 53.43 -2.45%

17INTRODUCTION TO FINANCE
4/30/2010
1186.6
9 -1.48% 4/30/2010 54.94 -2.83%
5/31/2010
1089.4
1 8.20% 5/31/2010 53.43 2.75%
6/30/2010
1030.7
1 5.39% 6/30/2010 50.3 5.86%
7/30/2010 1101.6 -6.88% 7/30/2010 50.05 0.50%
8/31/2010
1049.3
3 4.74% 8/31/2010 49.68 0.74%
9/30/2010 1141.2 -8.76% 9/30/2010 50.51 -1.67%
10/29/2010
1183.2
6 -3.69%
10/29/201
0 50.26 0.49%
11/30/2010
1180.5
5 0.23%
11/30/201
0 49.23 2.05%
12/31/2010
1257.6
4 -6.53%
12/31/201
0 51.08 -3.76%
1/31/2011
1286.1
2 -2.26% 1/31/2011 50.3 1.53%
2/28/2011
1327.2
2 -3.20% 2/28/2011 53.56 -6.48%
3/31/2011
1325.8
3 0.10% 3/31/2011 53.98 -0.78%
4/29/2011
1363.6
1 -2.85% 4/29/2011 57.27 -6.09%
5/31/2011 1345.2 1.35% 5/31/2011 56.99 0.49%
6/30/2011
1320.6
4 1.83% 6/30/2011 55.32 2.93%
7/29/2011
1292.2
8 2.15% 7/29/2011 55.78 -0.83%
8/31/2011
1218.8
9 5.68% 8/31/2011 54.32 2.62%
9/30/2011
1131.4
2 7.18% 9/30/2011 53.19 2.08%
10/31/2011 1253.3 -10.77%
10/31/201
1 54.21 -1.92%
11/30/2011
1246.9
6 0.51%
11/30/201
1 49.16 9.32%
12/30/2011 1257.6 -0.85%
12/30/201
1 50.57 -2.87%
1/31/2012
1312.4
1 -4.36% 1/31/2012 49.52 2.08%
2/29/2012
1365.6
8 -4.06% 2/29/2012 52.35 -5.71%
3/30/2012
1408.4
7 -3.13% 3/30/2012 53.63 -2.45%
4/30/2012 1397.9 0.75% 4/30/2012 50.57 5.71%

18INTRODUCTION TO FINANCE
1
5/31/2012
1310.3
3 6.27% 5/31/2012 48.78 3.54%
6/29/2012
1362.1
6 -3.96% 6/29/2012 49.33 -1.13%
7/31/2012
1379.3
2 -1.26% 7/31/2012 47.7 3.30%
8/31/2012
1406.5
8 -1.98% 8/31/2012 50.65 -6.18%
9/28/2012
1440.6
7 -2.42% 9/28/2012 51.66 -1.99%
10/31/2012
1412.1
6 1.98%
10/31/201
2 52.32 -1.28%
11/30/2012
1416.1
8 -0.28%
11/30/201
2 55.46 -6.00%
12/31/2012
1426.1
9 -0.71%
12/31/201
2 55.85 -0.70%
1/31/2013
1498.1
1 -5.04% 1/31/2013 58.5 -4.74%
2/28/2013
1514.6
8 -1.11% 2/28/2013 60.5 -3.42%
3/29/2013
1569.1
9 -3.60% 3/29/2013 64.43 -6.50%
4/30/2013
1597.5
7 -1.81% 4/30/2013 65.04 -0.95%
5/31/2013
1630.7
4 -2.08% 5/31/2013 62.05 4.60%
6/28/2013
1606.2
8 1.50% 6/28/2013 64.23 -3.51%
7/31/2013
1685.7
2 -4.95% 7/31/2013 66.24 -3.13%
8/30/2013
1632.9
7 3.13% 8/30/2013 60.71 8.35%
9/30/2013
1681.5
5 -2.97% 9/30/2013 58.73 3.26%
10/31/2013
1756.5
4 -4.46%
10/31/201
3 63.25 -7.70%
11/29/2013
1805.8
1 -2.80%
11/29/201
3 60.64 4.13%
12/31/2013
1848.3
6 -2.36%
12/31/201
3 61.07 -0.71%
1/31/2014
1782.5
9 3.56% 1/31/2014 57.98 5.06%
2/28/2014
1859.4
5 -4.31% 2/28/2014 60.69 -4.67%
3/31/2014
1872.3
3 -0.69% 3/31/2014 62.71 -3.33%

19INTRODUCTION TO FINANCE
4/30/2014
1883.9
5 -0.62% 4/30/2014 66.83 -6.57%
5/30/2014
1923.5
7 -2.10% 5/30/2014 68.98 -3.22%
6/30/2014
1960.2
3 -1.91% 6/30/2014 65.7 4.76%
7/31/2014
1930.6
7 1.51% 7/31/2014 59.83 8.93%
8/29/2014
2003.3
7 -3.77% 8/29/2014 64.97 -8.59%
9/30/2014
1972.2
8 1.55% 9/30/2014 61.6 5.19%
10/31/2014
2018.0
5 -2.32%
10/31/201
4 63.96 -3.83%
11/28/2014
2067.5
6 -2.45%
11/28/201
4 66.25 -3.58%
12/31/2014 2058.9 0.42%
12/31/201
4 65.44 1.22%
1/30/2015
1994.9
9 3.10% 1/30/2015 65.58 -0.21%
2/27/2015 2104.5 -5.49% 2/27/2015 64.48 1.68%
3/31/2015
2067.8
9 1.74% 3/31/2015 65.95 -2.28%
4/30/2015
2085.5
1 -0.85% 4/30/2015 63.33 3.97%
5/29/2015
2107.3
9 -1.05% 5/29/2015 62.77 0.88%
6/30/2015
2063.1
1 2.10% 6/30/2015 62.7 0.11%
7/31/2015
2103.8
4 -1.97% 7/31/2015 66.17 -5.53%
8/31/2015
1972.1
8 6.26% 8/31/2015 66.28 -0.17%
9/30/2015
1920.0
3 2.64% 9/30/2015 66.55 -0.41%
Risk
(STDEV) 4.32% 4.49%
Correalatio
n 0.291411426
Weightage Risk Return Portfolio
Market Kellogs Market Kellogs Market Kellogs Correlation Risk Return

20INTRODUCTION TO FINANCE
100% 0% 4.32% 4.49% 12% 7.11%
0.2914114
3 4.32% 12.00%
90.0% 10.0% 4.32% 4.49% 12% 7.11%
0.2914114
3 4.04% 11.51%
80.0% 20.0% 4.32% 4.49% 12% 7.11%
0.2914114
3 3.82% 11.02%
70.0% 30.0% 4.32% 4.49% 12% 7.11%
0.2914114
3 3.65% 10.53%
60.0% 40.0% 4.32% 4.49% 12% 7.11%
0.2914114
3 3.56% 10.04%
50.0% 50.0% 4.32% 4.49% 12% 7.11%
0.2914114
3 3.54% 9.55%
40.0% 60.0% 4.32% 4.49% 12% 7.11%
0.2914114
3 3.60% 9.06%
30.0% 70.0% 4.32% 4.49% 12% 7.11%
0.2914114
3 3.73% 8.57%
20.0% 80.0% 4.32% 4.49% 12% 7.11%
0.2914114
3 3.93% 8.08%
10.0% 90.0% 4.32% 4.49% 12% 7.11%
0.2914114
3 4.18% 7.60%
0.0% 100.0% 4.32% 4.49% 12% 7.11%
0.2914114
3 4.49% 7.11%
From the above table, it can be concluded that if 100% of the borrowings would be invest
in the market, then the investor would get higher return, but at higher risk level. If the investor
would split the borrowings equally between market and Kellogs, then the return rate would
decrease to 9.55%, but still it would be higher than the return rate from lending and the risk level
would also fall significantly.

21INTRODUCTION TO FINANCE
Bibliography:
Bodie, Z., Kane, A. and Marcus, A.J., 2014. Investments, 10e. McGraw-Hill Education
DeFusco, R.A., McLeavey, D.W., Anson, M.J., Pinto, J.E. and Runkle, D.E., 2015. Quantitative
investment analysis. John Wiley & Sons
Frank, K.R. and Keith, C.B., 2016. Investment analysis and portfolio management
Jordan, B., 2014. Fundamentals of investments. McGraw-Hill Higher Education
Kevin, S., 2015. Security analysis and portfolio management. PHI Learning Pvt. Ltd
Lazzati, N. and Menichini, A.A., 2015. A dynamic approach to the dividend discount
model. Review of Pacific Basin Financial Markets and Policies, 18(03), p.1550018
Massari, M., Gianfrate, G. and Zanetti, L., 2016. Estimating the cost of capital. Corporate
Valuation: Measuring the Value of Companies in Turbulent Times, pp.194-228
Runkle, D.E., DeFusco, R.A., Anson, M.J., Pinto, J.E. and McLeavey, D.W., 2013. Quantitative
Investment Analysis. Wiley