Note down price of FaceBook Inc. dated 1st November, and then note down price of FaceBook...

Note down price of FaceBook Inc. dated 1st November, and then note down price of FaceBook dated 28th Feb. Calculate holding period return for FaceBook for given time period. Now research internet to get risk-free rate of return, market return and beta for FaceBook. Appropriately refer all information and give reasons for selecting this data. Then calculate value of value of FaceBook using CAPM Model.

Expert Solution

Facebook
Stock price(close) ( refer- Yahoo finance)
Nov 1, 2019	193.62
Feb 28,2020	192.47
	-1.15
Holding period Yield
=((192.47-193.62)/193.62)	-0.594%


Beta of facebook( proxy firm - Google Alphabet)	1.08
Risk free return( US treasury bond due or callable in less than 10 years)	1.26%
Expected rate of return on market- annualized historical rate of return on large cap stock in US	10.10%

As per CAPM Re= Rf+Beta( Rm-Rf)
=1.26+(10.10-1.26)*1.08	10.81


Value stock as on Sept 18 2019	188.14

Value of stock now= Re=(Expected ending price/Price at the begning)-1
=.1081=(expected price/188.14)-1
= $208.47

jeff jeffy answered 2 years ago

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