Retrieve the risk-free rate of return as the annual interest rate of US treasuries. Based on these values estimate the expected annual rate of return of the corporation’s security. Compare your estimate with the expected rate of return as evaluated based on your data

Microsoft Corporation Financial Analysis

Microsoft Corporation

Income Statement

The Year Ended June 29, 2020

Data Source: (Yahoo Finance – 2020).

Microsoft Corporation

Bilanz

June 29, 2020

Data Source: (Yahoo Finance – 2020).

Retrieve the data on the company’s historical data Add to cart the annual rate of return Use the adjusted closing prices for the Past 20 years

The rate of return is the Net loss or gain over a time period for an investment.

Rate of Return = (Adjusted Closing Prices – Opening Prices) ÷ Adjusted Closing Prices × 100 (Kenton, 2020)

The positive rate of return refers to an increase in the value. A decline indicates that it has decreased. Rate The decline in stock value (Chen 2020). The company’s stock lost its value in the Year 2002, 2004, 2005 and 2008; year 2010, 2011, 2011; year 2012. In all other years, the company saw an increase in its value at a positive annual rate.

Using the data on the company’s stock rate of return And the index’s rate of return, estimate beta of the corporation. Compare the Value to that given by the source.

Beta = (Expected Return From the stock – Risk-free return) ÷ (Expected Market Return – Risk-free Return)

Beta = (0.2557 – 0.0275) ÷ (0.2683 – 0.0275) = 0.95

Microsoft has a beta of 0.92 according to Yahoo Finance 2020. It has a beta of less than one. Microsoft’s security is less volatile than the Market (Kenton, 2020).

The annual interest rate on US treasuries is the risk-free rate. Based on these values, estimate the expected annual rate of return of the corporation’s security. Comparing your estimated return with Part b of your data, you can see how it compares to your actual estimate.

Expected return = Risk-free rate + (Beta × Market Risk premium)

Or Expected Return SUM =Return i × Probability). This formula is based on historical data. It cannot be guaranteed to be accurate. Future (Chen, 2020).

These are the probabilities and expected returns. However, they cannot be known. As These are the outcomes, the expected return.

Expected return = 0.0078 + (0.92 × (0.2557 – 0.0078)) = 0.2359 = 23.59%

This is the Value of 2020 Part B: 25.57%. Both Positivity and Negativity have a Positive Effect Above 20%. Therefore, it’s safe to make investments in this industry. Microsoft Corporation.

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