NIKE ANALYSIS

3) Apply the Capital Asset Pricing Model (CAPM) Security Market Line to estimate the required

return on THE COMPANY stock. Note that you will needthe risk-free rate and the market return. Show this information in your project.

A) Apply the Capital Asset Pricing Model (CAPM) Security Market Line to estimate the required return on stock. Note that you will needthe risk-free rate, beta, and the market return.

b) To get the current yield on 10-year Treasury securities go to www.finance.yahoo.com

-

click on

Markets - U.S. Treasury Bonds Rates.

You will use the current yield on 10-year

Treasury securities as the risk-free rate to estimate the required rate of return on stocks.

Discuss how appropriate this rate is as a measure of risk.

c) Between 1926 and 2017, the compound annual rate of return of S&P 500 is estimated

a 6.5%. We will use this number as the market return.

Discuss how appropriate this rate

is as a measure of return.

c) Beta is listed in

www.finance.yahoo.com

and in

www.morningstar.com

on the

company's front page. What is the beta listed for the company? What does it mean?

d) Calculate the required return on the stock using the Capital Asset Pricing Model (CAPM) Security Market Line. Please show your work.