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# FINC 5001 Risk Free Rate CAPM Calculation

You currently work as a team at a major investment bank and have been tasked by the Investment Management Division (IMD) to analyse a stock that will be incorporated into a portfolio with other assets from the same market. You will need to prepare a professional business report that will be submitted to the Investment Management Division (IMD) that answers the questions proposed in this investment brief as well as a final recommendation.

 Marking Guide: Company A selection, description, and financial data Risk-free rate CAPM calculation

1. Describe Fedex, so that the IMD has a comprehensive understanding of its operations and risks.

2.Present a table of a current “stock quote” with the following characteristics: (1) Current Price (2) 52 Week Range (3) Market Cap (4) Beta (5) P/E Ratio (6) EPS (7) Earnings Date (8) Forward Dividend and Yield, (9) Ex-Dividend Date, and (10) 1 year Target Estimate for your chosen company. Define and interpret each characteristic.

3.Select an appropriate government-issued bond. The choice must be suitably justified to be used as a risk-free rate proxy. Graph the bond rate over the time period 2010-2019. How have interest rates changed over this period? Why do you think this has occurred? Do you think interest rates will go up or down in the future? Discuss with references to appropriate academic literature.

4.Calculate the required rate of return on equity for your chosen company using the Capital Asset Pricing Model (CAPM), with the stock’s beta value (from part 2) and the rate identified as a proxy for the risk-free rate (from part 3). Assume that an appropriate return on the market is 8% p.a. over the same period.