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Given Beta for Cisco Systems Inc (1.25) Capital On...

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Given Beta for Cisco Systems Inc (1.25) Capital One Financial Crop (1.72) Starbucks Corporation (1.26) and Walgreens Company (0.97) a. If you made an equal dollar investment in each of the four stocks, Cisco, Capital One, Starbucks, and Walgreen, what would be the beta of your portfolio? b. Apply the CAPM Security Market Line to estimate the required return on Starbucks stock, and compare the required return against the return over the last twelve months, which you can find by clicking on the "Company Report" link next to the "More SBUX information" below the chart. Look in the section entitled "Stock Price History". In order to apply CAPM, you will need an estimate of the market risk premium and of the risk-free rate, rRF. Assume a 5 percent market risk premium, and get the current yield on 10-year Treasury securities by clicking on the "Investing" tab at the top of the MSN Money page, then "Market Report" in the left-hand column. (You can also find the rate on the front page of the business section of most daily business newspapers.) Use the 10-year yield on Treasury securities as the risk-free rate.

 

Paper#12138 | Written in 18-Jul-2015

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