Apply the Capital Asset Pricing Model (CAPM) Security Market Line to estimate the required return on both stock. Note that you will need the risk-free rate and the market return.
a) To get the current yield on 10-year Treasury securities go to Finance!Yahoo’s at www.finance.yahoo.com -click on Market Data - U.S. Treasury Bonds. You will use the current yield on 10-year Treasury securities as the risk-free rate to estimate the required rate of return on stocks.
b) Between 1926 and 2014, the compound annual rate of return of S&P 500 is estimated a 10.5%. We will use this number as the market return.
c) Calculate the required return on both stockusing the Capital Asset Pricing Model (CAPM) Security Market Line. Please show your work.