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Let's estimate the required return for MCD. Here are the historic returns for various asset classes. Compounding N I/YR PV PMT FV Small Stocks 1
Let's estimate the "required return" for MCD. Here are the historic returns for various asset classes.
Compounding | N | I/YR | PV | PMT | FV | |
Small Stocks | 1 orange PMT | 89 | 12.17 | $1.00 | 0.00 | $27,419.32 |
Large Stocks (S&P500) | the "Market" | 89 | 10.12 | $1.00 | 0.00 | $5,316.85 |
LT Govt Bonds | 89 | 5.67 | $1.00 | 0.00 | $135.18 | |
T-Bills | "Risk-free" | 89 | 3.47 | $1.00 | 0.00 | $20.58 |
Inflation | 89 | 2.93 | $1.00 | 0.00 | $13.10 |
Use this equation to estimate the "required return" for MCD; that is, Rs.
Rs=Rf+beta*(Rm-Rf)
Rs=Required return of the stock Rf=Risk-free rate Rm=Return on the "Market"
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