Assume that today is 21 April 2020. Pick a stock listed on the ASX that is not CBA and is distinct from your friends in the class. Students copying from their friends will score zero and be referred to the academic misconduct committee. Download the stock's daily stock prices from Yahoo finance from 20 April 2018 to 21 April 2020. Also download the ASX200 index's (^AXJO) daily stock prices from 20 April 2018 to 20 April 2020. Note: Quote all returns as decimals per annum. So don't write 7% pa, write just 0.07.

Q1a (3 marks) Find the beta of the stock based on daily effective returns since 20 April 2018.

Q1b (1 mark) If your beta calculations used monthly instead of daily data, would you expect your beta estimate to be higher, lower or the same?

Q1c (1 mark) If your beta calculations used monthly instead of daily data, would you expect your beta estimate's standard error to be higher, lower or the same?

Q1d (1 mark) Find the current risk free rate using the 10 year Australian government bind yield.

Q1e (1 mark) Find the latest available average Australian market risk premium (MRP) using Fernandez ett al (2020)

Q1f (1 mark) Find the required annual effective return according to the CAPM.

Q1g (1 mark) Find the historical geometric average effective return per annum (GANDR pa) Unexpectedly, a moment after the market closes on 21 April 2020, the stock announces a 3 for 4 rights issue at a subscription price 30% lower than its current stock price (SP=MP*(1-0.3)).

Assume that all shareholders participate in the rights issue and that the ex-rights date is the next day, 22 April 2020.

Q2a (0.5 marks) State the stock's market closing price on 21 April 2020, before the rights issue was announced. There is no calculation required here, just look up the (unadjusted) closing price on 21 April. We need this price to check your answer to the next few questions.

Q2b (5 marks) Calculate the stock's expected ex-rights price when the market closes on the ex-rights date of 22 April. Ignore the time value of money over the short time since the announcement.

Q2c (0.5 marks) Also calculate the stock's new adjusted closing price at the same point in time.

Q3a (5 marks) Plot a graph of the stock's past daily adjusted closing prices from 20 Arpil 2018 to 21 April 2020. Stock prices should be on the y-axis and the dates on the x-axis. On the same graph, plot your forecast of the stock's future unadjusted daily closing prices from 21 April 2020 to 21 April 2022. Include the effect of the rights issue and dividends. Note that you're asked to plot your stock's forecast unadjusted closing price, which means that dividends and rights issues should affect the future stock price. Assume that the stock pays dividends annually every 20 April (ex-dividend date) at a yield of 4% pa. Do not use the stock's actual dividend yield, use 4% pa. Assume that the ex-dividend date is 20 April. In your forecasts, ignore all public holidays and assume hat stocks trade on all weekdays.

Q3b (2 marks) state the expected stock price at market close 21 April 2022.

Q4a (5 marks) Plot a separate graph of your wealth in shares from 21 April 2020 to 21 April 2022. Assume that you own 100 stock as at market close 21 April 2020. Assume that all dividends are immediately re-invested back into the stock at market close on the ex-date, 20 April every year. Assume that your 100 shares on 21 April 2020 do not include those you will receive in the rights issue later that same evening. You have the funds available to buy the extra stock in the rights issue detailed in Question 2 which was just announced and will be completed tonight. Ignore the fact that the dividend payment date is after the ex date. Ignore franking Assume that you can buy fractions of a stock, so don't round your number of stock In your forecasts, ignore all public holidays and assume that stocks trade on all weekdays.

Q4b (2 marks) State your expected wealth in stock as at market close 21 April 2022.