FB has a beta of 1.3, DE has a beta of 0.8, and IBM has a beta of 118. The market risk premium is 8.5% and the risk-free rate is 3.3%. You estmated that FB's stock price will grow to $155 a share next year, from the current level of $115 a share. DE's stock price will be $190 next year, were it.is $178 currently, IBM will be at $145 next year, where it is $123 currently. FB will not pay dividends, and DE will pay $3.4 in dividends next vear, while IBM will pay $5.8 in dividends. Should you buy/short either of these stocks? Please show work with excel formulas
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
26. FB has a beta of 1.3, DE has a beta of 0.8, and IBM has a beta of 118. The market risk premium is 8.5% and the risk-free rate is 3.3%. You estmated that FB's stock price will grow to $155 a share next year, from the current level of $115 a share. DE's stock price will be $190 next year, were it.is $178 currently, IBM will be at $145 next year, where it is $123 currently. FB will not pay dividends, and DE will pay $3.4 in dividends next vear, while IBM will pay $5.8 in dividends. Should you buy/short either of these stocks?
Please show work with excel formulas
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