Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Instructions: Perform CAPM regression for XYZ Company based on the stock returns, market ( S&P 5 0 0 ) returns, and risk freee rate data

Instructions: Perform CAPM regression for XYZ Company based on the stock returns, market (S&P 500) returns, and risk freee rate data
shown below. Use the slope function to determine XYZ's beta (slope function) and alpha (intercept function).
Answer the following questions:
Based on your regression analysis, does XYZ Company have more or less systematic risk than that of the market?
Should XYZ Company's fair value return be more or less than that of the market (S&P 500)? Explain.
Calculate the annualized alpha using the beta and the annualized returns of XYZ, S&P 500, and T-Bills. (Note: you CANNOT multiply the alpha from the intercept by 12. That won't work!)
Mar 01
Apr 01
May 01
Jun 01
Jul 01 Aug 01
Sep 01
Oct 01
Nov 01
Dec 01
Feb 02
Mar 02
Apr 02
May 02
Jun 02
Jul 02 Aug 02
Sep 02
Oct 02
Nov 02
Dec 02
Feb 03
Mar 03
Apr 03
May 03
Jun 03
Aug 03
Sep 03
Oct 03
Dec 03
Jan 04
Feb 04
Mar 04
Apr 04
May 04
Jun 04
Jul 04
Aug 04
Sep 04
Oct 04
Dec 04
Jan 05
Feb 05
Mar 05
Apr 05
May 05
Jun 05
Jul 05
Aug 05
Sep 05
CAPM Regression Graph for XYZ Stock
Q3: Annualized Alpha Solution (Do not hard code calculation - use absolute & relative cell references)
image text in transcribed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Personal Finance

Authors: Jack Kapoor, Les Dlabay, Robert J. Hughes

8th Edition

007322359X, 9780073223599

More Books

Students also viewed these Finance questions