You are a summer intern at a boutique asset management company. You are working in managed account department. Your supervisor has assigned you to write a report for a potential client that is considering forming a portfolio. The client is interested in Semiconductor and Oil and Gas industries. Given the uncertainty with current financial markets, this client is considering investing only for the medium term (approximately 5 years).

Your supervisor has instructed you to pick two stocks of your choice to form a portfolio, one from each of the two industries that the client has indicated interest in. To help you get started quickly, your supervisor shortlists some companies that you can choose from in each of the industry.

Semiconductor: Intel Corporation, Nvidia Corporation Oil and Gas: ExxonMobil, Chevron Corporation

You don’t need to optimise your choice between the two companies in each industry. Your analysis work will start after you make your choice. Please write this report as on January 3rd, 2020. Do not include data after the closing prices on this date.

Required:
1. Using Yahoo Finance, obtain market index and stock price data for your client’s portfolio companies to estimate their equity betas.
• Use an ordinary least squares regression under the Capital Asset Pricing Model (CAPM).
Explain and justify your methodology, including: how key variables are measured, time horizon, measurement intervals, market index, and risk-free rate.

The web address for free Yahoo Finance information is: finance.yahoo.com. For the risk-free rate to be used in this report, you should use the information on the US Treasury page (https://home.treasury.gov/policy-issues/financing-the-government/interest-rate-statistics). Choose relevant government bond rates.

2. Estimate annualised expected return of each stock using CAPM model and the annualised standard deviation of each stock using information or data from the above step.