use the information in TABLE 1 below to answer questions 56 to 63s. Show , point
ID: 2806749 • Letter: U
Question
use the information in TABLE 1 below to answer questions 56 to 63s. Show , point values as indicated all work. TABLE 1 FedEx Corporation (FOX) ~.hin'e, nuo +1.94 (+0.81% 56.10 points. Assume the dividend given is Di. what is the stock's Holding Period Return? Treasury Yield Maturity 3 Month 6 Month 2 Year 5 Year 10 Year 241.99 %Yield Market Cap Beta PE Ratio (TTM) 64.894B 1.32 1.48 1.82 2.14 2.35 2 57. 4 points. What is the expected return on the 22.82 EPS (TTM) 10.61 Earnings Date Dec 19, 2017 30 Year Forward Dividend 2.00 (0.83%)! market? & Yield Ex-Dividend Date ty Target Est Market Risk Premium: 2017-12-08 15.15% 243.88 Use the 10-year Treasury bond for the Risk-free Rate 58.5 points. What is the stock's fair return according to CAPM? 59.4 points. What is the stock's risk premium? 60.3 points. On the Security Market Line, what expected return will you find at a Beta equal to zero?Explanation / Answer
1
Holding period return=(243.88+2-241.99)/241.99=1.6075%
2
Expected return on market=2.35%+5.15%=7.50%
3
Stock's fair return=2.35%+1.54*5.15%=10.281%
4
Stock's risk premium=1.54*5.15%=7.931%
5
2.35%
6
As expected return is less than required return, stock lies below SML
7
As the stock lies below SML, it is overvalued
8
Hence we will short the stock
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