- 1 An Investor Is Considering An Investment In Mcdonald S Stock The Risk Free Rate Of Return Is 1 5 The Market Rate O 1 (128.43 KiB) Viewed 30 times
1) An investor is considering an investment in McDonald's stock. The risk free rate of return is 1.5%, the market rate of return is 8.0% and McDonald's Beta is 0.61. a) Based on the CAPM, what is the investor's required rate of return on the stock? Show all calculations using Excel formulas. b) McDonald's stock is currently selling at a price of $252.00 a share. The investor strongly believes that a year from now the stock will be worth $260.00 a share. The investor also expects that Mc Donald's will pay a dividend of $5.10 a share during the com year. If the investor buys the stock today and holds if for a year, what will her holding period return for the year be if her predictions come true? Show all work using Excel formulas. c) If the investor is absolutely convinced that her predictions in part b will come true, based on solely your calculations in parts a and b, above, does it make sense for the investor to invest in McDonald's stock at this time? Explain your reasoning.