Develop the expected return for your portfolio

Assignment Help Financial Management

Reference no: EM131957304

You have $100,000 to invest in 4 stocks. Pick each stock from a different sector (for example, technology, energy, consumer products, automotive).

Prepare the following using Excel. Make sure that your spreadsheets are well formatted, clear and understandable. Feel free

1) Identify the expected returns using Yahoo Finance. Look at current stock price, expected stock price in one year and the annual dividend. The expected stock price in one year less the current stock price plus the annual dividend gives you the return on your investment (expected appreciation in stock price plus the annual dividend you received). Divide this by the initial investment to get the return on your investment.

2) Once you have the expected return for each stock, identify the overall expected return. This is the return of all stocks weighted by the portion they constitute of your total investment. See slide 13-12 (from Chapter 13).

3) Develop the expected return for your portfolio of stocks using the Capital Asset Pricing Model. See slide 13-41. Assume the risk free rate is 2.6% (approximate US Treasury 10 yr bill rate). Assume the market risk premium is 6.7% (long term average stock market return, including dividends). Because of this, you do not need to add in the dividend yield of your stocks, unlike what I said in class. Calculate the average return for your portfolio of stocks. Compare the returns for each stock and the overall portfolio to what you calculated in 1) above.

4) Are there any reasons why one set of values may be different from the other? If the expected returns from 1) above are higher than those calculated in 3), it may be due to recent favorable conditions for the stack which are resulting in strong estimates for the stock price one year from now. See if you can find any reasons for possible differences.

Reference no: EM131957304

Questions Cloud

How can such strategies align with other incentive systems : How can such strategies align with other incentive systems such as public reporting and payment? Elaborate on and support your assertions with credible sources.

Prepare a professional report for qantas : PACC6006 Taxation Law - professional correspondence you are required to prepare a professional report for Qantas - The judgment made in each case

Summarize the mission statement : Provide one suggestion for a creative way for the Human Resources department to communicate the mission statement in a more visible manner.

Write formal paper that describing the history of the issue : Describing the history of the issue. A title, introduction, and a reference page are required, but an abstract and conclusion are not.

Develop the expected return for your portfolio : Develop the expected return for your portfolio of stocks using the Capital Asset Pricing Model.

Describe how your capstone company dealt with public crisis : If you cannot find a recent example with your Capstone company, describe how a competitor or another company handled a recent public crisis.

What is the incidence or prevalence provided : What is the incidence or prevalence provided? Which is it? Incidence or prevalence that they are reporting? How does it make you feel? Scared? Empowered?

Process improvement framework and problem solving framework : Compare and contrast the fundamental differences between process improvement framework and problem solving framework.

Future role of unions in supply chain management : Your individual project effort is a research paper based on your choice of title within one of the following areas of exploration.

User Account

All Pages