Reference no: EM133037152

Question - The annual return of Amazon stock price based on the last 10 years of data is estimated to have a mean of 45% and a standard deviation of 50%. These numbers are 12% and 10% for a widely diversified index tracking the market (S&P 500). The one- year US Treasury Bill yield is 2%. The beta of Amazon is 1.3. An analyst makes weekly recommendations of "sell," "hold," and "buy" for Amazon when its annual return is believed to be around 20%, 40%, and 60%, respectively. Past data shows that the analyst recommended a sell, a hold, and a buy, 20%, 30%, and 50% of the past 52 weeks, respectively. Estimate the expected return for Amazon based on historical data, CAPM, and the analyst recommendations.