Fina310

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AMERICAN INTERCONTINENTAL UNIVERSITY
FINA310-1205B-08
GLENN DIENER
I P #3 01/27/2013

ABSTRACT
Walk through a set of financial data for stock XYZ, using information on a 10 year treasury U S treasury bond found a tBloomberg.com: Market Data showing how theoretical stock prices are calculated and how prices may react to market forces such as risk and interest rates. Use both the CAPM (capital asset pricing model) and the constant growth model (CGM) to arrive at XYZ's stock price. Show all work, including formulae and calculations used to arrive at financial values. Use an assumed market risk premium of 9.00%. Then assume the market risk premium has increased from 9.00% to 12% and this increase is due only to the increased risk in the market. In other words, assume the krf and the stock's beta remains the same for this exercise. Discuss what factors may be at work for such a difference in the two prices.

Using a constant set of financial data, for stock XYZ, taken from a 10 year U S treasury bond found at Bloomberg.com: Market Data I will show how theoretical stock prices are calculated and how prices may react to market forces such as risk and interest rates. Use both the CAPM (capital asset pricing model) and the constant growth model (CGM) to arrive at XYZ's stock price. Show all work, including formulae and calculations used to arrive at financial values. Use an assumed market risk premium of 9.00%. Actual growth rates may vary due to market discrepancy and fluctuations occurring at actual time, with unexpected events of the market, which will cause the stock to go up or down. All prices are calculated from the stocks past performance during past market events. the following information was taken from Bloomberg.com: Market Data and acts as our constant in the following examples of stock X Y Z . RISK FREE RATE OF U.S. 10-YEAR TREASURY BOND IS 1.95%

MARKET RISK PREMIUM IS 9.00%
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