Determine the expected return using capm


Problem: Determine the expected return using these two methods for the three stocks below using the Capital Asset Pricing Model (CAPM) and is determined as: Kj = rf + beta (rm-rf) and by using the dividend growth model: Ke = D1/Po + g. (Please show work so I can get a better understanding).

Microsoft Corporation (NasdaqGS: MSFT)
Sector: Technology
Industry: Application Software
Beta: 0.98
Stock's price percentage change: ($28.18 - $17.42) / $17.42 = 61.77%

Wal-Mart Stores (NYSE: WMT)
Sector: Services
Industry: Discount, Variety Stores
Beta: 0.25
Stock's price percentage change: ($53.43 - $45.58) / $45.58 = 17.22%

JP Morgan Chase Company (NYSE: JPM)
Sector: Financial
Industry: Money Center Banks
Beta: 1.17
Stock's price percentage change: ($38.94 - $25.06) / $25.06 = 55.39%

S&P 500 Index (SNP: ^GSPC)
Percentage change: (1,073.87 - 825.44)/ 825.44 = 30.10%

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Finance Basics: Determine the expected return using capm
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