Forecasting prices and returns

Use history

Use analyst forecast

Other forecasting techniques

The historical average annual return on S&P500 index is 12% and the risk free rate averaged 4%. If the current T-Bill rate is 0.03%, what is expected return on S&P500 index?

The current stock price of ABC Co is $50 per share and the company pays quarterly dividends of $0.50 per share. Analysts rate the stock and make price forecasts as follows.

Rating	No. of Analysts	Average Price forecast
Strong buy	5	$56
Buy	4	53
Hold	2	50
Sell	1	45
Strong sell	1	42

What rate of return do you expect on ABC for the coming year?

Answer rating: 100% (QA)

To calculate the expected return on the SP 500 index we need to use the Capital Asset Pricing Model ... View the full answer