From Yahoo!Finance obtain a report on any two companies . What are the betas lis
ID: 2763152 • Letter: F
Question
From Yahoo!Finance obtain a report on any two companies.
What are the betas listed for these companies?
Target
Beta:
0.54
52-Week Change3:
2.20%
S&P500 52-Week Change3:
0.08%
52-Week High (Jun 23, 2015)3:
85.81
52-Week Low (Jan 20, 2016)3:
66.46
50-Day Moving Average3:
81.45
200-Day Moving Average3:
75.60
Wal-Mart
Beta:
0.19
52-Week Change3:
-11.66%
S&P500 52-Week Change3:
0.08%
52-Week High (Apr 24, 2015)3:
80.93
52-Week Low (Nov 13, 2015)3:
56.30
50-Day Moving Average3:
67.81
200-Day Moving Average3:
63.36
If you made an equal dollar investment in each stocks what would be the beta of your portfolio?
If you made 70% of dollar investment in stock A, and 30% of dollar investment in stock B, what would be the beta of your portfolio? Please show your work.
Apply the Capital Asset Pricing Model (CAPM) Security Market Line to estimate the required return on these two stocks. Assumptions and Data: Note that you will need the risk-free rate and the market risk premium. Assume a 5% market risk premium. To get the current yield on 10-year Treasury securities go to Finance!Yahoo’s (www.finance.yahoo.com) -click on Market Data - Bonds. You will use the current yield on 10-year Treasury securities as the risk-free rate to estimate the required rate of return on stocks.
Beta:
0.54
52-Week Change3:
2.20%
S&P500 52-Week Change3:
0.08%
52-Week High (Jun 23, 2015)3:
85.81
52-Week Low (Jan 20, 2016)3:
66.46
50-Day Moving Average3:
81.45
200-Day Moving Average3:
75.60
Explanation / Answer
1.Target (TGT): 0.54
Wal-Mart (WMT): 0.19
2.
If you made an equal dollar investment in each stocks what would be the beta of your portfolio?
=(0.5 * 0.54) + (0.5*0.19)
= .27 + .095
Beta = 0.365
3. If you made 70% of dollar investment in stock A, and 30% of dollar investment in stock B, what would be the beta of your portfolio? Please how your work.
= (0.70 * 0.54) + (.30 * 0.19)
= 0.378 + .057
Beta = 0.435
Using CAPM the required return for
Target =1.7% + 0.54*5% =4.40%
Walamart = 1.7%+ 0.19*5% =2.65%
Cap would givr rrequires return for next year
The 52 week return for these stock will differ because
these are historical returns and cap gives expected returns
No this not a problem as lot variables are dynamic in nature and hence are changing
Like beta , market risk premium can change over time
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