BAC221 Business Finance- Assignment Problem

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Reference no: EM132377531 , Length: word count : 500

BAC221 – Business Finance

Report Assessment

Question 1 –

You are required to find the expected return of any 3 major companies belonging to the same industry in Australia using CAPM.

i. Log on to Australian website for Bloomberg. Find the Markets Data link and the ‘Rates and Bonds’ link, then Australian Bonds. Find the current RBA cash rate and use this together with the All Ordinaries Index Return in Table 10.3 of your text book to calculate the market risk premium.

ii. Next log on to au dot finance dot yahoo dot com. Enter the ASX code for any 3 companies of your choice belonging to the same industry. Find the beta for each of the four companies and calculate their expected returns using CAPM.

iii. Draw the Security Market Line using the data calculated in the above question. Display the risk free asset and the expected return on the market along with the 3 companies.

Question 2 –

Prepare a report outlining the following -

i. Any 3 assumptions made to arrive at Expected Return using CAPM equation

ii. Explain what you understand if actual observed share lies above the SML, below the SML and on the SML.

iii. How would the market forces react such that actual observed shares above or below the SML adjust to reflect correct prices.

Reference no: EM132377531

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