Using your estimate of the cost of capital for the spy to, Financial Management

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Using your estimate of the cost of capital for the spy to

Using your estimate of the cost of capital for the SPY to form a valuation (price prediction) of the XLF (the S&P 500 financials sector). Download the history of prices and dividend payments for this ETF from Yahoo! Finance starting in 2005.

a. Something strange happened to the XLF on September 19. What do you see in the data on that date and what is the explanation?

b. Estimate the growth rate of dividends adjusting for seasonality and the September event.

c. Apply the r* from question 4 to form a price target.

d. Based on the results what do you suggest doing? Sell XLF? Buy XLF? Buy SPY? Sell Both? Explain.

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