1. Please choose one stock that trades on the NYSE. Find an estimate of its beta. Yahoo Finance is a great source for this number. Then estimate its required return using the CAPM formula. Use a long run return on the S&P 500 to estimate the market return. Scroll to the bottom of this page for long run S&P 500 return calculations. Please use the US treasury rates to estimate the risk free rate of return. Please type out the CAPM calculation so we can see how you found the number that you did.
2. Then, calculate the required returns for two other firms in the same industry as your original firm above. Please show your calculations. (Reminder: the only thing that will change in the calculation is the firm's beta.)
3. Finally discuss the following: What does the beta tell us about a stock? Which had the highest and the lowest required return of the group? Were you surprised by what you found?