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    ** Please see attached file for the problem information **

    Use the information on the pages to provide a "fair price" for the securities.

    © BrainMass Inc. brainmass.com October 2, 2020, 1:49 am ad1c9bdddf


    Solution Preview

    We use need both the DDM and CAPM to evaluate each of the ten stocks. However, note that ddm is not applicable for some of the stocks. I will point those out when we get there.

    First, we need the current interest rate. From Finance.yahoo.com, we can find the current 10 year gov't bond yields 2.997%. For ease of calculation, we say that the current rate, r, is 3%.

    Lastly, let me remind you the formulae for ddm and capm.

    DDM: p = d/(r-g), where p is price, d is annual dividend, r is interest rate and g is dividend growth rate.

    CAPM: Expected return = risk free + beta[expected market return - risk free]

    Expected market return is found on pg 2 and is PRICE CHANGE-YTD = 7%.

    We begin calculating price of ATT

    By CAPM, expected return = 0.03 + 0.24(0.07 - ...

    Solution Summary

    This solution explains how to use DDM and CAPM to evaluate the given ten stocks and calculate the fair price of this series of publicly traded stocks.