From Yahoo!Finance obtain a report on any two companies.
- What are the betas listed for these companies?
- If you made an equal dollar investment in each stocks what would be the beta of your portfolio?
- 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 show your work.
- Apply the Capital Asset Pricing Model (CAPM) Security Market Line to estimate the required return on these two stocks. Assumptions and Data: Note that you will need the risk-free rate and the market risk premium. Assume a 5% market risk premium. To get the current yield on 10-year Treasury securities go to Finance!Yahoo’s (www.finance.yahoo.com) -click on Market Data – 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.
- Compare the required return on these stocks calculated using CAPM in question #3 against their historical return over the last 52 weeks, found in the Yahoo!Finance – Key Statistics. Is there a difference between these returns? Is this a problem? Why is there a difference?
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