Answered step by step
Verified Expert Solution
Question
1 Approved Answer
please I need clear answers 1. Choose one publicly traded stock that has not been chosen by any other student and estimate its required rate
please I need clear answers
1. Choose one publicly traded stock that has not been chosen by any other student and estimate its required rate of return according to CAPM (Equation 11.7, pp373, Example 11.8). (Hint, from yahoo.com/finance find its beta, and find 10-year Treasury note rate or yield for the day you are estimating the return (Current Risk free rate); for (Rm - Rt), use the historical average presented in Figure 10-10, page 326; In Figure 10-10, For Rm use large company stock, and for Rpuse long term government bond. 2. Use the same company in 1 and download 5 years of monthly data. Estimate the stand alone risk of this company. (Hint: Estimate monthly return and then estimate Standard Deviation of monthly returns). 3. Explain expected return, holding period return (realized return) and required return. In what condition, expected return equals required retur? 4. How do we measure the riskiness of a stock if it is held in isolation (stand alone risk) 5. What is unsystematic risk? What is systematic risk? How do we measure the riskiness of a stock if it is held within a portfolio? 1. Choose one publicly traded stock that has not been chosen by any other student and estimate its required rate of return according to CAPM (Equation 11.7, pp373, Example 11.8). (Hint, from yahoo.com/finance find its beta, and find 10-year Treasury note rate or yield for the day you are estimating the return (Current Risk free rate); for (Rm - Rt), use the historical average presented in Figure 10-10, page 326; In Figure 10-10, For Rm use large company stock, and for Rpuse long term government bond. 2. Use the same company in 1 and download 5 years of monthly data. Estimate the stand alone risk of this company. (Hint: Estimate monthly return and then estimate Standard Deviation of monthly returns). 3. Explain expected return, holding period return (realized return) and required return. In what condition, expected return equals required retur? 4. How do we measure the riskiness of a stock if it is held in isolation (stand alone risk) 5. What is unsystematic risk? What is systematic risk? How do we measure the riskiness of a stock if it is held within a portfolio Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started