User Account

All Pages

Calculate the required return on both stockusing

Assignment Help Finance Basics
Reference no: EM131731874

Evaluation of portfolio beta and the required return on stock

The tendency of a stock's price to move up and down with the market is reflected in its beta coefficient. Therefore, beta is a measure of an investment's market risk, and is a key element of the CAPM.

In this part of the project, you get financial information using Yahoo! Finance

To find a company's beta, enter the desired stock symbol and request a basic quote. Once you have the basic quote, select the "Statistics". Scroll down this page to find the stock's beta.

In your initial response to the topic you have to answer all 5 questions.

You are expected to make your own contribution in a main topic as well as respond with value added comments to at least two of your classmates as well as to your instructor.

From Yahoo!Finance obtain a report on any two companies.

1. What are the betas listed for these companies?

2. If you made an equal dollar investment in each stocks what would be the beta of your portfolio? Please how your work.

3. If you made 70% of dollar investment in stock A, and 30% of dollar investment in stock B, what would be the beta of your portfolio? Please how your work.

4. Apply the Capital Asset Pricing Model (CAPM) Security Market Line to estimate the required return on both stock. Note that you will need the risk-free rate and the market return.

a) To get the current yield on 10-year Treasury securities go to Finance!Yahoo's at www.finance.yahoo.com -click on Market Data - U.S. Treasury Bonds. You will use the current yield on 10-year Treasury securities as the risk-free rate to estimate the required rate of return on stocks.

b) Between 1926 and 2014, the compound annual rate of return of S&P 500 is estimated a 10.5%. We will use this number as the market return.

c) Calculate the required return on both stockusing the Capital Asset Pricing Model (CAPM) Security Market Line. Please show your work.
Find on the Internet the 52-weeks change of the stock price. Compare the required return on these stocks calculated using CAPM against their historical return over the last 52 weeks. Is there a difference between these returns? Are these stock overvalued, undervalued, or properly valued? Why? In accordance with your founding, is it reasonable for the investor to buy any of these stocks? Explain your answers.

Verified Expert

The paper is in relation to evaluation the effect of beta on the portfolio n also the calculation of the expected rate of return using the Capital Asset Pricing Model (CAPM). Moreover, the stock price of the last 52 weeks has been compared with the expected rate of return using CAPM for making investment decisions.

Reference no: EM131731874

Questions Cloud

Describe the processes of diffusion and osmosis : Describe the processes of diffusion, osmosis, and facilitated diffusion
Perform thee random acts of kindness : Describe a time where you were the victim of prejudice or discrimination - Briefly share what happened and your reactions - What are some strategies
What are some stereotypes of therapy : What are some stereotypes of therapy that either you hold personally or have heard or seen from others - How would you describe the stereotypical therapist
Define how do peds actually enhance a players body : Do you think records that were set or broken during the time the athlete was using PED's should be recognized and validated
Calculate the required return on both stockusing : Calculate the required return on both stockusing the Capital Asset Pricing Model - Security Market Line - Compare the required return on these stocks
Discuss the steps to take in case of a medication error : Discuss the steps to take in case of a medication error, Discuss the serious implications of any failure to follow correct procedures
Environmental analysis : Environmental Analysis. Describe and analyze the effectiveness of a major organizational change.
Average of the means for the mobility handicaps : Handicap Study. Consider the groups amputee, crutches, and wheelchair to be handicaps of mobility and hearing to be a handicap affecting communication.
Define symptoms that your patient may be in pain : What are the signs and symptoms that your patient may be in pain. When do you treat your patient for pain

Reviews

Write a Review

Finance Basics Questions & Answers

  The current stock price is 25 what is the expected

dividend yield and capital gain yield. n companys last dividend d0 was 1. earnings and dividends are expected to grow

  Determine the cost of the merchandise

Determine the cost of the merchandise sold for each sale and the inventory balance after each sale. Based upon the preceding data, would you expect the inventory to be higher or lower using the last-in, first-out method?

  What is the portfolio weight of stock d

You own a portfolio that consists of $8,000 in stock A, $4,600 in stock B, $13,000 in stock C, and $5,500 in stock D. What is the portfolio weight of stock D?

  Prepare entry to record acquisition of the computer system

Provide the journal entry recorded by Stockton at the end of 2011 under the doubledeclining-balance method.

  Average amount of peanut butter

Using Crystal Ball, calculate the daily cancer risk for a child who weighs 20 kg and who eats an average amount of peanut butter.  Please use the average values for the required parameters. Do the same for a 20 kg child who drinks an average amoun..

  Inheritance to purchase four us treasury bonds

Elliot Karl is a 35-year old bank executive who has just inherit a large amount of money. Having spent several years in the bank's investment department, he is well aware of the concept of duration and decides to apply it to his bond portfolio..

  Should a mnc change

In your opinion do Multinational Corporations compromise ethics to compete internationally? Should a MNC change, alter or stretch their ethical standards to compete internationally?

  American bankruptcy institute

Write an essay after listening to the most recent Press Briefing on the American Bankruptcy Institute's website.

  Nominal annual rate of return

Ingrid Birdman can earn a nominal annual rate of return of 12%, compounded semiannually. If Ingrid made 40 consecutive semiannual deposits of $500 each, with the first deposit being made today, how much will she accumulate at the end of Year 20? R..

  How does this change if the interest is paid more frequently

How much will an initial investment of $1,000 earning interest of 8% a year be worth at the end of 20 years? How does this change if the interest is paid more frequently?

  Month income set aside for emergencies

The table shows the results of a survey in which 142 male and 145 female workers ages 25 and 64 were asked if they had at least one month's income set aside.

  What is the total market value of the firm equity

A firm has a total book value of equity 300000 a market to book ratio of 3 and a book value per share of 8.00 what is the total market value of the firm equity

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd