Pick you favorite stock, go to Yahoo Finance and look up that stock\'s beta. Usi

Question

Pick you favorite stock, go to Yahoo Finance and look up that stock's beta. Using a price earnings ration of the S and P of 25 or 4% for the market rate of return and 2.5% for the risk free rate tell me the expected rate of return using the stock's beta. CAPM= rf + (( * mkt ror) -rf)) CAPM = risk free rate plus ( beta of stock times Market Rate of Return minus the Risk Free rate)

I chose

Nike https://finance.yahoo.com/quote/NI?p=NI&.tsrc=fin-srch

Kroger https://finance.yahoo.com/quote/KR?p=KR&.tsrc=fin-srch

Please show all works and calculations

Explanation / Answer

We know from CAPM that the return on a stock is given by riskfree rate+beta8(market return-risk free)

For Nike: Beta is 0.04..hence, returns=2.5%+0.04*(4%-2.5%)=2.56%

For Kroger: Beta is 0.83..hence, returns=2.5%+0.83*(4%-2.5%)=3.745%

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