a. b. C. d. e. f. The following data have been developed for a listed company,...

 

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a. b. C. d. e. f. The following data have been developed for a listed company, Happy Cat. Market's Return 0.1 Happy Cat's Return 0.06 0 -0.04 0.16 0.12 -0.06 0.01 0.15 0.25 Year 2018 2019 2020 2021 2022 The YTM on risk-free Treasury Bills is 4% and is expected to remain at this point for the foreseeable future. Calculate the sample variance of the market return. Show your calculations. Correct your answers to 4 decimal places. [4 marks] Find the sample covariance between the return for Happy Cat and the market. Show your calculations. Correct your answers to 6 decimal places. [4 marks] Calculate the beta of Happy Cat. Show your calculations. [2 marks] Use the CAPM to find the required rate of return of Happy Cat. [3 marks] If Happy Cat distributes $2 annual dividend in one year and the annual dividend is assumed to grow at 4% per year indefinitely, find the fair stock price of Happy Cat now. Show your workings. [3 marks] Suppose Steven buys 5,000 shares of Happy Cat at the fair stock price now. If the market drops by 1.5% in one month, estimate the dollar amount of capital gain or loss for his investment in one month. Explain your answer. [4 marks] a. b. C. d. e. f. The following data have been developed for a listed company, Happy Cat. Market's Return 0.1 Happy Cat's Return 0.06 0 -0.04 0.16 0.12 -0.06 0.01 0.15 0.25 Year 2018 2019 2020 2021 2022 The YTM on risk-free Treasury Bills is 4% and is expected to remain at this point for the foreseeable future. Calculate the sample variance of the market return. Show your calculations. Correct your answers to 4 decimal places. [4 marks] Find the sample covariance between the return for Happy Cat and the market. Show your calculations. Correct your answers to 6 decimal places. [4 marks] Calculate the beta of Happy Cat. Show your calculations. [2 marks] Use the CAPM to find the required rate of return of Happy Cat. [3 marks] If Happy Cat distributes $2 annual dividend in one year and the annual dividend is assumed to grow at 4% per year indefinitely, find the fair stock price of Happy Cat now. Show your workings. [3 marks] Suppose Steven buys 5,000 shares of Happy Cat at the fair stock price now. If the market drops by 1.5% in one month, estimate the dollar amount of capital gain or loss for his investment in one month. Explain your answer. [4 marks]

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To calculate the sample variance of the market return well use the formula Sample Variance X X2 n 1 Where X individual market return X mean of market returns n number of observations Lets calculate th... View the full answer