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%