Computation of security market line

Reference no: EM1316708

Computation of Security Market Line (SML) of stocks and its analysis.

Name	Symbol	Exp Price date (p1)	Price today\'s date close (p0)	Gain/loss	Expected Dividend -same as previous year	Return Percentage	Stock Beta from Yahoo	Desired Portfolio Percent
Ebay Inc.	EBAY	$ 22.27	$ 23.60	$ (1.33)	$0.00	-5.64%	1.75	15%
Sun Trust Bank	STI	$ 19.18	$ 22.55	$ (3.37)	$0.75	-11.62%	1.27	30%
Safeway Inc.	SWY	$ 20.71	$ 19.72	$ 0.99	$0.37	6.90%	0.66	35%
Starbucks Corp.	SBUX	$ 17.64	$ 20.65	$ (3.01)	$0.00	-14.58%	1.32	20%
		$ 79.80	$ 86.52					100%

Using each of the four stocks selected for your portfolio last week

Calculate the Security Market Line (SML) equation for each stock.
Assume a U.S. Treasury rate of 3% as the risk free rate in your SML. Use the beta for your stock as presented in
What does the SML tell you about your portfolio of stocks? How can the SML assist in predicting the expected return on your stocks?

Reference no: EM1316708

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