Question: 6. (10 points) Your CIO is asking you to compute each stocks idiosyncratic volatility (i.e., ) using the same monthly data for the previous 5

6. (10 points) Your CIO is asking you to compute each stocks idiosyncratic volatility (i.e., ) using the same monthly data for the previous 5 years. After talking to your investment team, you decide to use the S&P 500 as the market portfolio (SPY). Assume that the risk free rate Rf equals 0.

(a) Estimate the monthly idiosyncratic volatility for each BINFA stock and comment (b) Which stock has the highest and lowest idiosyncratic volatility? Why do you think that is the

case?

Your boss asks you to focus on Ford, since the endowment is considering making a large investment in the stock going forward. Your task is to find the fair value of the stock using a DCF analysis. Assume the valuation date is 12/31/2022.

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