Calculate the 2016 expected return on facebooks shares use, Financial Management

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Calculate the 2016 expected return on facebooks shares use

Using the CAPM, calculate the 2016 expected return on Facebook’s shares.

Assumptions:

Risk-free rate, Rf = 2.5%

E(Rm) = 7.5%

Use the SP500 index to proxy for the market portfolio.

Hints to calculate beta:

- Use daily stock returns during 2016 (start date 01-Jan-2016, end date 31-Dec-2016).

- Download stock prices for Facebook and the SP500 with ticker name FB and ^GSPC, respectively, from www.finance.yahoo.com.

- Use adjusted prices to calculate returns.

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