Question
Using the information above (the stocks Beta, the rate on the 3-month Treasury and the average 52-week return for the S&P 500), compute the required
Using the information above (the stocks Beta, the rate on the 3-month Treasury and the average 52-week return for the S&P 500), compute the required rate of return for your stock. In other words, plug these numbers into the Capital Asset Pricing Model (CAPM), the table is below.
Next, select another stock to add to your portfolio.
Use the CAPM to determine the expected return of this additional stock.
Here is the information you will need to complete the table:
Apple: Beta=1.31, 52-week change=46.99%, and 52-week change for the S&P=21.90%
Amazon: Beta=1.34, 52-week change=57.67%, and 52-week change for the S&P=22.03%
3-month Treasury Rate is 1.41%.
Unit 4 Discussion Table | |||||
Complete the required information in the table. | |||||
Stock Symbol | % of portfolio | Beta | Contribution to portfolio Beta | Expected Return (using CAPM) | Contribution to Portfolio Return |
Apple | 50% | 1.31 | |||
Amazon | 50% | 1.34 | |||
Portfolio Beta | Portfolio Return |
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