I need some help with the two questoins below. I have two companies that I am using for this. I will provide those companies after the handshake.
1. Apply the Capital Asset Pricing Model (CAPM) Security Market Line to estimate the required return on these two stocks. Assumptions and Data: Note that you will need the risk-free rate and the market risk premium. Assume a 5% market risk premium. To get the current yield on 10-year Treasury securities go to Finance!Yahoo’s (www.finance.yahoo.com) -click on Market Data – Bonds. 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.
2. Compare the required return on these stocks calculated using CAPM in question #3 against the market’s historical return over the last 52 weeks. Is there a difference between these returns? Is this a problem? Why is there a difference?