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| 11.1 Expected Return. You want to find the expected return for Honeywell using the CAPM. First you need the market risk premium. Go to money.cnn.com, find the "Bonds & Rates" link, and the "Latest Rates" link. Find the current interest rate for three-month Treasury bills. Use the average large-company stock return in Table 10.3 to calculate the market risk premium. Next, go to finance.yahoo.com, enter the ticker symbol HON for Honeywell, and follow the "Profile" link. In the Statistics at a Glance section you will find the beta for Honeywell. What is the expected return for Honeywell using CAPM? What assumptions have you made to arrive at this number?
11.2 Portfolio Beta. You have decided to invest in an equally weighted portfolio consisting of American Express, Procter & Gamble, Home Depot, and Du Pont and need to find the beta of your portfolio. Go to finance.yahoo.com and follow the "Symbol Lookup" link to find the ticker symbols for each of these companies. Next, go back to finance.yahoo.com, enter one of the ticker symbols and get a stock quote. Follow the "Profile" link to find the beta for this company. You will then need to find the beta for each of the companies. What is the beta for your portfolio? 11.3 Beta. Which stock has the highest and lowest betas? Go to finance.yahoo.com and find the "Stock Screener" link. Enter 0 as the maximum value. How many stocks have a beta in this range? Which stock has the lowest beta? Go back to the screener and enter 3 as the minimum value. How many stocks have a beta greater than 3? What about 4? Which stock has the highest beta? |