From the Wall Street Journal, a website such as Yahoo! Finance, or some other source, obtain a
Question:
From the Wall Street Journal, a website such as Yahoo! Finance, or some other source, obtain a current estimate of the risk-free rate (use a 10-year Treasury bond). Use the Value Line Investment Survey or Yahoo! Finance to obtain the beta for each of the companies listed.
a. Compare the current betas with the August 2018 betas given in the chapter for each of the companies.
b. What might cause betas to change over time, even in a stable economic environment?
c. Use the current betas, along with a market risk premium on stocks of 6%, to find the required return for each stock with the CAPM.
d. Compare and discuss your findings in part c with regard to the specific business of each company.
Step by Step Answer:
a The comparison is that the betas for each company as of August 2018 are higher than their current ...View the full answer
Fundamentals Of Investing
ISBN: 9780135175217
14th Edition
Authors: Scott B. Smart, Lawrence J. Gitman, Michael D. Joehnk
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Stocks (also known as equities) are securities that represent ownership in a company. They are issued by companies to raise capital, and when an individual buys stocks, they become a shareholder in that company. Investing in stocks can be a way for individuals to potentially earn a return on their investment through dividends and capital appreciation. However, investing in stocks also carries a level of risk, as the value of the stock can fluctuate based on various factors such as the financial performance of the company and general market conditions. For companies, issuing stocks can be a way to raise funds for growth and expansion. When a company goes public by issuing an initial public offering (IPO), it can raise significant capital by selling ownership stakes to the public. Companies can also issue additional stock offerings to raise additional capital as needed.
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