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FIN 402 - Week 3 - CAPM Web Exercise
$ 15.00

S&P 500 index - decreased 40% as compared to its level on June 2009.

Increase in the Oracle approximately by 10%. S

In comparison to the market the deviations of the stock are compared by Beta. 1.5 is the estimated stock beta for Oracle, the beta is estimated to be 1 when both beta and market movement is done in the same direction, add the difference (0.40 + 0.10) to 1 and estimate the number (Beta)  1.50.

Ki = Rf + bi (KM - Rf)

Rf (Risk free rate)         = 4.6%

(KM – Rf) Equity risk premium = 6.4%

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