Measure of An Investment’s Market Risk
Order ID 53563633773 Type Essay Writer Level Masters Style APA Sources/References 4 Perfect Number of Pages to Order 5-10 Pages Description/Paper Instructions
Measure of An Investment’s Market Risk
The tendency of a stock’s price to move up and down with the market is reflected in its beta coefficient. Therefore, beta is a measure of an investment’s market risk, and is a key element of the CAPM.
In this part of the project, you get financial information using Yahoo!Finance (found at http://finance.yahoo.com/ )
To find a company’s beta, enter the desired stock symbol and request a basic quote. Once you have the basic quote, select the “Statistics”. Scroll down this page to find the stock’s beta
From Yahoo!Finance obtain a report on any two companies. TARGET and SEAR CORPORATION HOLDINGS
What are the betas listed for these companies?
If you made an equal dollar investment in each stocks what would be the beta of your portfolio? Please how your work.
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.
Apply the Capital Asset Pricing Model (CAPM) Security Market Line to estimate the required return on both stock. Note that you will need the risk-free rate and the market return.
To get the current yield on 10-year Treasury securities go to Finance!Yahoo’s at 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.
To get the market return go to www.money.cnn.com, Click on Market, then click on S&P 500.You will use 52-weeks change for S&P500 listed as “Year-to-Date” percentage change.
Calculate the required return on both stock using the Capital Asset Pricing Model (CAPM) Security Market Line. Please show your work.
Find on the Internet the 52-weeks change of the stock price.
Compare the required return on these stocks calculated using CAPM against their historical return over the last 52 weeks. Is there a difference between these returns?
Are these stocks overvalued, undervalued, or properly valued? Why? In accordance with your founding, is it reasonable for the investor to buy any of these stocks? Explain your answers.
Measure of An Investment’s Market Risk
RUBRIC
QUALITY OF RESPONSE NO RESPONSE POOR / UNSATISFACTORY SATISFACTORY GOOD EXCELLENT Content (worth a maximum of 50% of the total points) Zero points: Student failed to submit the final paper. 20 points out of 50: The essay illustrates poor understanding of the relevant material by failing to address or incorrectly addressing the relevant content; failing to identify or inaccurately explaining/defining key concepts/ideas; ignoring or incorrectly explaining key points/claims and the reasoning behind them; and/or incorrectly or inappropriately using terminology; and elements of the response are lacking. 30 points out of 50: The essay illustrates a rudimentary understanding of the relevant material by mentioning but not full explaining the relevant content; identifying some of the key concepts/ideas though failing to fully or accurately explain many of them; using terminology, though sometimes inaccurately or inappropriately; and/or incorporating some key claims/points but failing to explain the reasoning behind them or doing so inaccurately. 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