The following stock quotation for McDonald reported on Friday, May 8, 2020 when

market closed at 4:00 PM Eastern time

McDonald's Corp. (MCD) -NYSE

182.66 -4.90 (-2.61%) At close: May 8 4:00PM EDT

Previous Close

187.56

Market Cap

135.81B

Open

184.00

Beta (5Y Monthly)

0.60

Bid

182.45 x 800

PE Ratio (TTM)

23.91

Ask

182.85 x 1000

EPS (TTM)

7.64

Day's Range

182.15 - 185.54

Earnings Date

Jul 28, 2020

52 Week Range

124.23 - 221.93

Forward Dividend & Yield

5.00 (2.74%)

Volume

3,764,754

Ex-Dividend Date

Feb 28, 2020

Avg. Volume

5,705,392

1y Target Est

202.93

(1) What was May 8th close price of McDonald stock? How did it change from previous day (May 7th )?

(2) If you purchased McDonald stock at the 52 weeks low and sold it at close price on May 8, 2020. You have received dividend during this holding period. Calculate your holding period rate of return

(3) Show how the 2.74% yield is calculated.

(4) Currently, the 3-month T-bill interest rate is 0.5%, and required return for the stock market is 12%. Calculate required rate of return for McDonald stock using the CAPM model.

(5) Assume the dividend growth rate is 5%, calculate the true value and annual rate of return of McDonald stock using Gordon model.

(6) Draw a security market line (SML) using the data above. Determine the intercept and slope of the SML

(7) According to the CAPM model, will you buy McDonald stock or not? Why? (36 points)