FMIA Assignment

FMIA Assignment:Aug-Nov15 Name: X Y Johnson Student No: LO445566666 Company allocated for assignment: Whitbread Total Word count (a-d) = 2000(about 10 pages excluding appendices)
(a)(i) You will be given a company on the New York Stock Exchange. Access data such as share prices and annual reports on the company from the public domain. Using the Market Model and weekly data over the last year find the beta of the company. (20 marks) Introduction: (150 words) good write up on company and its position in the sector;
comparison of sharemarket index and company
0 20 40 60 80 100 120 140 160 180 03/11/201123/12/201111/02/201201/04/201221/05/201210/07/201229/08/201218/10/201207/12/201226/01/2013
WTB FTAS NMX5750
a(ii)Discussion of the Market Model 1 A4 page–300 words
a (iii) (contd)Estimation of Market Model forWhitbread (example)
proper interpretation of the F statistic, R^2 , alpha, beta, p values on the market model regressions
Market Model for Whitbread SUMMARY OUTPUT Regression Statistics Multiple R 0.59907 R Square 0.358885 Adjusted R Square 0.345801 Standard Error 0.024002 Observations 51 ANOVA df SS MS F Significance F Regression 1 0.01580 0.01580 27.4294 3.41E-06 Residual 49 0.02822 0.00057 Total 50 0.04403
Coefficients
Standard Error t Stat P-value Intercept 0.005595 0.00336 1.66120 0.10305 RFTAS 1.321349 0.252296 5.237308 3.41E-06
regression results interpretation
The entire model estimated is valid as the F-significance is <0.05 The coefficient ofRFTAS 1.32 is valid as its p value is <0.05 (if p val of your coeff is >0.05, then the coefficient of RFTAS is not valid and the beta of the industry has to be taken as a surrogate) R^2 is a measure of the extent to which the model fits the data. When it is more than 30%, the model is considered as a good explanator of the data; here it is 35%,.
y = 1.321x + 0.005
-0.1 -0.05 0 0.05 0.1 -0.04 -0.02 0 0.02 0.04 RWHIT RFTAS RFTAS Line Fit Plot RWHIT Predicted RWHIT Linear (Predicted RWHIT)
(b) Research the concept of the UK market risk premium and critically discuss the relevance of this concept under existing market conditions. (20 marks) 1 A4 page–300 words
Note that Market risk premium is unique for entire market; MRP= rm-rf
(c) Analyse the shape of the US yield curve and with reference to academic literature offer explanations for its shape (20 marks)
2 pages: 600 words
This is a Sample only…..not the correct current shape of yield curve to be shown, theories of yield curve, common shapes to be discussed and current shape explained
(d) Using the theory of the Capital Asset Pricing Model evaluate the current price of the share and use it to make a recommendation on whether the share as at 1 Aug 2015, should be held, bought or sold. (20 marks)
Estimation of share return for period ended 1 Aug 2015 using the CAPM
Suppose Rf: risk free rate from the yield curve for 1 year =0.39 (from yield curve – sample only)
Market Risk Premium: = Rm –rf
Example (to be substantiated from own research) = 3.5%
CAPM return = rf+β (Rm-rf)
= 0.39+ 1.32 (0.035) = 0.0501= 5.01%
Actual Return
Share price: 1 Feb 2014 = 214p
1 Feb 2015 = 235p
Dividend = 12p
Actual return = (235+12-214)/214 = 0.154 = 15.4%
Make recommendation on : Buy, Sell Hold and explain why
d) Critically appraise all assumptions you have made in making your recommendation.
(20 marks)
2 A4 pages 600 wds —————————
References (Harvard style)
Appendices
Data used for estimation of Share’s Beta
Appendix 1:
Date FTAS WHITBD RFTAS RWHIT 01/09/2014 3644.57 4392 0.001381 0.000683 26/08/2014 3639.54 4389 0.005555 0.003652 18/08/2014 3619.38 4373 0.012847 0.022665 11/08/2014 3573.18 4275 0.019639 0.035718 04/08/2014 3503.69 4125 -0.01567 -0.03525 28/07/2014 3559.02 4273 -0.01681 -0.00746 21/07/2014 3619.34 4305 0.006478 -0.00186 14/07/2014 3595.97 4313 0.008148 0.022273 07/07/2014 3566.79 4218 -0.0275 -0.04497 30/06/2014 3666.23 4412 0.017011 0.008193 23/06/2014 3604.39 4376 -0.00938 -0.00615 16/06/2014 3638.35 4403 0.00546 0.01211 02/06/2014 3618.54 4350 -0.01003 0.03843 27/05/2014 3655.01 4186 0.006596 0.026181 19/05/2014 3630.98 4077.83 -0.00191 0.050478 12/05/2014 3637.91 3877.1 0.000168 -0.0444 06/05/2014 3637.3 4053.11 -0.00143 0.007101 28/04/2014 3642.52 4024.43 0.017148 0.005914 22/04/2014 3580.59 4000.7 0.007313 -0.00222 14/04/2014 3554.5 4009.6 0.008082 0.006184 07/04/2014 3525.89 3984.88 -0.02216 -0.06508 31/03/2014 3604.88 4252.85 0.012685 0.018303 24/03/2014 3559.44 4175.72 0.007399 0.005938 17/03/2014 3533.2 4151 0.003672 -0.00854 10/03/2014 3520.25 4186.6 -0.02748 -0.02955 03/03/2014 3618.34 4312.18 -0.01327 -0.02848 24/02/2014 3666.66 4436.76 -0.00094 0.076389 17/02/2014 3670.1 4110.46 0.024733 0.019434 10/02/2014 3580.44 4031.35 0.01414 0.035451 03/02/2014 3530.17 3890.94 0.009581 0.047888 27/01/2014 3496.51 3709 -0.01955 -0.01928 20/01/2014 3565.54 3781.19 -0.02503 -0.03267 13/01/2014 3655.91 3906.77 0.010968 0.018135 06/01/2014 3616.03 3836.56 0.003055 0.035681 30/12/2013 3605 3702.08 -0.00098 0.003745 23/12/2013 3608.52 3688.24 0.020406 0.021134
16/12/2013 3535.63 3611.11 0.025245 0.042796 09/12/2013 3447.49 3459.83 -0.01506 0.002005 02/12/2013 3499.8 3452.9 -0.01381 -0.02125 25/11/2013 3548.45 3527.06 -0.00026 0.023828 18/11/2013 3549.37 3444.01 -0.0032 0.024121 11/11/2013 3560.76 3361.93 -0.00268 -0.00645 04/11/2013 3570.33 3383.69 -0.00438 -0.00066 28/10/2013 3585.99 3385.94 0.0013 0.021708 21/10/2013 3581.33 3313.23 0.013522 0.006246 14/10/2013 3533.23 3292.6 0.021554 0.042987 07/10/2013 3457.89 3154.06 0.005789 0.080407 30/09/2013 3437.93 2910.38 -0.0085 -0.0227 23/09/2013 3467.27 2977.19 -0.01196 -0.00099 16/09/2013 3508.99 2980.14 0.000314 -0.03372 09/09/2013 3507.89 3082.33 0.006593 -0.00952 02/09/2013 3484.84 3111.81

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