Compute the beta coefficient for each stock

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Reference no: EM13844940

1. Based on five years of monthly data, you derive the following information for the compa- nies listed:

Company

(Intercept)

σ i

M

Intel

0.22

12.10%

0.72

Ford

0.10

14.60

0.33

Anheuser Busch

0.17

7.60

0.55

Merck

0.05

10.20

0.60

S&P 500

0.00

5.50

1.00

  1.  Compute the beta coefficient for each stock.
    1. Assuming a risk-free rate of 8 percent and an expected return for the market portfolio of 15 percent, compute the expected (required) return for all the stocks and plot them on the SML.

    2. Plot the following estimated returns for the next year on the SML and indicate which stocks are undervalued or overvalued.

      • Intel-20 percent

      • Ford-15 percent

      • Anheuser Busch-19 percent

      • Merck-10 percent

Reference no: EM13844940

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