EVALUATION OF PORTFOLIO BETA AND THE REQUIRED RETURN ON STOCKThe tendency of a stock's price to move up and down with the marketis reflected in its beta coefficient. Therefore, beta is a measureof an investment's market risk, and is a key element of the CAPM.In this part of the project, you get financial information usingYahoo!Finance (found athttp://finance.yahoo.com/ ) andwww.money.cnn.com To find a company's beta, enter the desired stocksymbol and request a basic quote. Once you have the basic quote,select the \"Statistics\". Scroll down this page to find the stock'sbeta. In your initial response to the topic you have to answer all5 questions. You are expected to make your own contribution in amain topic as well as respond with value added comments to at leasttwo of your classmates as well as to your instructor. FromYahoo!Finance obtain a report on any two companies. What are thebetas listed for these companies? If you made an equal dollarinvestment in each stocks what would be the beta of your portfolio?Please how your work. If you made 70% of dollar investment in stockA, and 30% of dollar investment in stock B, what would be the betaof your portfolio? Please how your work. Apply the Capital AssetPricing Model (CAPM) Security Market Line to estimate the requiredreturn on both stock. Note that you will need the risk-free rateand the market return. a) To get the current yield on 10-yearTreasury securities go to Finance!Yahoo’s at www.finance.yahoo.com-click on Market Data - U.S. Treasury Bonds. You will use thecurrent yield on 10-year Treasury securities as the risk-free rateto estimate the required rate of return on stocks. b) Between 1926and 2014, the compound annual rate of return of S&P 500 isestimated a 10.5%. We will use this number as the market return. c)Calculate the required return on both stock using the Capital AssetPricing Model (CAPM) Security Market Line. Please show your work.Find on the Internet the 52-weeks change of the stock price.Compare the required return on these stocks calculated using CAPMagainst their historical return over the last 52 weeks. Is there adifference between these returns? Are these stock overvalued,undervalued, or properly valued? Why? In accordance with yourfounding, is it reasonable for the investor to buy any of thesestocks? Explain your answers. 9 0
