12 May In this assignment, you are to estimate a security market line.
In this assignment, you are to estimate a security market line. You have current information about beta and expected annual return on 5 assets, as given in the following table: Beta Expected return 0.25 0.046 0.5 0.056 0.8 0.073 1.25 0.112 1.5 0.149 (Note that expected return is a decimal, so the first asset has an expected return of 4.6%.) Please do the following and turn in a 2-4 page, double-space typed report to answer the following: 1. Run a regression line to determine the slope and y-intercept of the security market line. If you need help figuring out the regression line to run, you can refer to Chapter 11 and find the graph that shows this. Include a printout of the regression work done as an appendix (which will not count against the 4-page limit). You can use any computer program you want to run your regression. 2. Explain how to interpret your regression, including what the slope and y-intercept mean in terms we have used in this class. Calculate 95% confidence intervals for the slope and y-intercept. (Note: Even if a computer printout shows a 95% confidence interval, you must still show how it was calculated.) 3. Look up the current return on one-year Treasury bills/notes as your risk-free rate. Two good sources are http://fxtrade.oanda.com/analysis/economic-indicators/united-states/rates/yield-curve and http://online.wsj.com/mdc/public/page/mdc_bonds.html. In your report, please state your source and the date used. 4. Given the current risk-free rate, does the regression estimate of your risk-free rate match the actual current risk-free rate? Use confidence intervals to help answer this question. 5. What is the current expected market rate of return (based on your regression)? Please show all of your work and/or explain how you get your answers. If you use a statistical package to calculate any of the above answers, you still need to show how these numbers are calculated in your report. Note on academic misconduct: It is academic misconduct on this homework assignment to use anybody else’s computer output to answer these questions. You must complete the regressions for your report by yourself (or within your group), but you can get help on how to do regressions in general from any person or source you desire. Each report must be done independently of other reports.
Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Fill in all the assignment paper details that are required in the order form with the standard information being the page count, deadline, academic level and type of paper. It is advisable to have this information at hand so that you can quickly fill in the necessary information needed in the form for the essay writer to be immediately assigned to your writing project. Make payment for the custom essay order to enable us to assign a suitable writer to your order. Payments are made through Paypal on a secured billing page. Finally, sit back and relax.
About Writedemy
We are a professional paper writing website. If you have searched a question and bumped into our website just know you are in the right place to get help in your coursework. We offer HIGH QUALITY & PLAGIARISM FREE Papers.
How It Works
To make an Order you only need to click on “Order Now” and we will direct you to our Order Page. Fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Are there Discounts?
All new clients are eligible for 20% off in their first Order. Our payment method is safe and secure.