Question: PLEASE USE EXCEL AND SHOW YOUR WORK XYZ Co has 15,000 shares of common stocks. The stock has a standard deviation of return of 8.29%

PLEASE USE EXCEL AND SHOW YOUR WORK

XYZ Co has 15,000 shares of common stocks. The stock has a standard deviation of return of 8.29% and the stock index has a standard deviation of return of 6.84%. The correlation coefficient between stock return and stock index return is 0.74. The stock is expected to pay dividend of $3 in one year, $3 in two years, $3 in three years. Its expected price in three years is $65. The risk-free rate is 3%. The stock market index has an expected return of 12%.

a. Estimate the beta of the stock. Is the stock riskier than the stock market index? Explain.

b. Use the security market line to determine the required rate of return of the stock.

c. Determine the per share value of the stock.

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