Use Excel to perform all calculations – the more you use the functionality of Excel, the more
credit you will earn. So, create formulas in Excel rather than doing calculations manually.
Record the explanations in Excel as well. Create a Text Box for your written response so that
you answer is visible. Upload the one Excel file1.
1Use the CAPM to compute the reasonable return for each of these fashion related stocks.
Use 0.80% as the risk free rate of return use 5.0% as the market rate of return.
Retrieve beta from Yahoo Finance at http://finance.yahoo.com/.
a. PVH Corp (PVH)
b. Coty (COTY)
c. Guess? (GES)
2. Use the CAPM to compute the reasonable return for each of these stocks. Use risk free
rate of return and the market rate of return given in #1, above.
a. Coca Cola (KO)
b. Walmart (WMT)
c. McDonald’s (MCD)
3. Why do the returns you computed above represent
a. a reasonable (or fair) return for each stock?
4. What do you notice about the pattern or trend of returns for the fashion companies (in #1)
as compare to those of the non-fashion companies (in #2)? Why does that occur? Does
that make sense in terms of the line of business of the companies in the respective
groups?
