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erry Allen graduated from the University of Arizona with a degree in Finance in 2011 and took a job with an investment banking firm as a financial analyst. One of his first assignment is to investigate the investor-expected rate of return for technology firms: Apple (APPL), Dell (DELL) and Hewlett Packard (HPQ). Jerry’s supervisor suggested that he make his estimates using CAPM where the risk-free rate is 4.5%. the expected return on the market is 10.5%. The expected rate return for Apple using the beta from Yahoo and the beta from MSN and a risk-free rate of 4.5% and a market risk premium of 6% BETA   Yahoo MSN Apple (APPL) 2.90 2.58 Dell (DELL) 1.81 1.37 Hewlett Packard (HPQ) 1.27 1.47           1.      Calculate the expected return using CAPM equation using a beta coefficient of 2.00    2.      Solve the expected return for Apple using the beta from Yahoo and the beta from MSN and a risk-free rate of 4.5% and a market risk premium of 6% yield    3.      Calculate the expected return with the CAPM equation using each of the following beta estimates for the three technology firms. Present the information in a tabulated format

erry Allen graduated from the University of Arizona with a degree in Finance in 2011 and took a job with an investment banking firm as a financial analyst. One of his first assignment is to investigate the investor-expected rate of return for technology firms: Apple (APPL), Dell (DELL) and Hewlett Packard (HPQ). Jerry’s supervisor suggested that he make his estimates using CAPM where the risk-free rate is 4.5%. the expected return on the market is 10.5%. The expected rate return for Apple using the beta from Yahoo and the beta from MSN and a risk-free rate of 4.5% and a market risk premium of 6% BETA   Yahoo MSN Apple (APPL) 2.90 2.58 Dell (DELL) 1.81 1.37 Hewlett Packard (HPQ) 1.27 1.47           1.      Calculate the expected return using CAPM equation using a beta coefficient of 2.00    2.      Solve the expected return for Apple using the beta from Yahoo and the beta from MSN and a risk-free rate of 4.5% and a market risk premium of 6% yield    3.      Calculate the expected return with the CAPM equation using each of the following beta estimates for the three technology firms. Present the information in a tabulated format

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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erry Allen graduated from the University of Arizona with a degree in Finance in 2011 and took a job with an investment banking firm as a financial analyst. One of his first assignment is to investigate the investor-expected rate of return for technology firms: Apple (APPL), Dell (DELL) and Hewlett Packard (HPQ). Jerry’s supervisor suggested that he make his estimates using CAPM where the risk-free rate is 4.5%. the expected return on the market is 10.5%. The expected rate return for Apple using the beta from Yahoo and the beta from MSN and a risk-free rate of 4.5% and a market risk premium of 6%

BETA

 

Yahoo

MSN

Apple (APPL)

2.90

2.58

Dell (DELL)

1.81

1.37

Hewlett Packard (HPQ)

1.27

1.47

 

 

 

 

 

1.      Calculate the expected return using CAPM equation using a beta coefficient of 2.00 

 

2.      Solve the expected return for Apple using the beta from Yahoo and the beta from MSN and a risk-free rate of 4.5% and a market risk premium of 6% yield 

 

3.      Calculate the expected return with the CAPM equation using each of the following beta estimates for the three technology firms. Present the information in a tabulated format 

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