March T_u3 ip fin

March T_u3 ip fin - 6 Kj= Rf[bj(Km –Kf 3.54 1.64 10 3.54...

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Terrance March September 11, 2009 FIN410 Unit 3 IP 1. Risk free rate of interest= 3.54 2. 1. 1.64 2. $0.80 3. 8.2 4. 23.2 5. $4.87 3. Ks = CAPM Rj= Rf+[bj * (rm-Rf)] 3.54 + [1.64 * (7.5)] 54. 12.3 = 15.84 4. CGM Po= D1 / KS-G 9/7.64 Po= 1.17801 5. IBM current stock quote= 105.68
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Changes in price occur for many reasons. There are things that effect it to a great deal. Risk and return go hand in hand and play an important part. Where there is a large risk there is a great return. Stocks have a risk and return. When looking at a stock you wonder how did it get to the price it is and what risk.
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Unformatted text preview: 6. Kj= Rf +[bj * (Km –Kf)] 3.54 + [ 1.64 * 10)] 3.54 * 16.4 19.94 There was a large increase due to the change in the market risk premium. The change of 7.5 % to 10% made a large difference. 7. CGM Stock price= 23.2 * 4.87 112.984 The current price stock is different from the theoretical price because of the price earnings. Price earnings is what makes the difference in calculations. The Constant Growth Model is just that. The price is different because of the growth that is shown. When a stock grows the price grows....
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This note was uploaded on 02/21/2011 for the course FINANCE 410 taught by Professor N/a during the Spring '09 term at AIU Online.

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March T_u3 ip fin - 6 Kj= Rf[bj(Km –Kf 3.54 1.64 10 3.54...

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