# US government bond returns

Published: Last Edited:

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## Risk Premium = 14% - 6.69% = 7.31%

Due to lack of data of Ameritrade, an accurate beta estimate is not possible. Therefore we can analyze similar firms in similar industries as they will be prone to the same kind of risks. We can easily calculate their equity betas through the data given in the case study. Further asset beta can be finally calculated by knowing the capital structure at market values for the firms selected for comparison. Their average can be used for obtaining asset beta.

Formulae used:

Rt = (Pt - Pt-1 + Dt) / Pt-1

when there is a x for y stock split : Rt = {(x/y)Pt - Pt-1 + (x/y)Dt} / Pt-1

where,

Rt - return

Pt - price at time t

Î²A = [D/(D+E)]Î²D + [E/(E+D)]Î²e

Assume that debt has no relationship to market risk; that Î²D€ €½€ 0 ie debt has no relation to market risk.

Î²A - Beta Asset E - Equity

Î²e - Beta Equity D - Debt

Charles Schwab

Date

30-Sep-87

29,121

15.875

1

1

-0.02074

1

30-Oct-87

29,121

7.875

1

1

-0.22487

-1.016

30-Nov-87

29,121

6.625

1

1

-0.0729

-0.189

31-Dec-87

25,388

6

1

1

0.07041

-0.104

29-Jan-88

25,388

6.5

1

1

0.04534

0.077

29-Feb-88

25,388

9

1

1

0.05161

0.278

31-Mar-88

25,388

7.375

1

1

-0.01706

-0.22

29-Apr-88

25,388

7.625

1

1

0.011

0.033

31-May-88

25,388

6.875

1

1

0.00094

-0.109

30-Jun-88

25,294

7.25

1

1

0.05139

0.052

29-Jul-88

25,294

7.5

1

1

-0.00718

0.033

31-Aug-88

25,294

6.75

1

1

-0.02794

-0.111

30-Sep-88

25,328

6.75

1

1

0.03728

0

31-Oct-88

25,328

7.5

1

1

0.01765

0.1

30-Nov-88

25,328

6.75

1

1

-0.0164

-0.111

30-Dec-88

25,354

6.75

1

1

0.0208

0

31-Jan-89

25,354

10.25

1

1

0.06594

0.341

28-Feb-89

25,354

8.625

1

1

-0.01636

-0.188

31-Mar-89

25,354

8.875

1

1

0.02155

0.028

28-Apr-89

25,354

10.125

1

1

0.04853

0.123

31-May-89

25,354

11.75

0.03

1

1

0.03965

0.141

30-Jun-89

25,352

11

1

1

-0.00498

-0.068

31-Jul-89

25,352

16.5

0.03

1

1

0.07772

0.335

31-Aug-89

25,352

15.75

1

1

0.02228

-0.048

29-Sep-89

25,386

14

1

1

-0.00175

-0.125

31-Oct-89

25,386

13

0.03

1

1

-0.02938

-0.075

30-Nov-89

25,386

12.5

1

1

0.01785

-0.04

29-Dec-89

25,332

13.875

1

1

0.01828

0.099

31-Jan-90

25,332

13.5

0.03

1

1

-0.07005

-0.026

28-Feb-90

25,332

15.25

1

1

0.01498

0.115

30-Mar-90

25,332

17

1

1

0.02415

0.103

30-Apr-90

25,332

15.125

0.03

1

1

-0.02816

-0.122

31-May-90

25,332

15.75

1

1

0.08887

0.04

29-Jun-90

25,099

15.25

1

1

-0.0043

-0.033

31-Jul-90

25,099

13.625

0.03

1

1

-0.00938

-0.117

31-Aug-90

25,099

12.625

1

1

-0.09173

-0.079

28-Sep-90

25,255

11.375

1

1

-0.05387

-0.11

31-Oct-90

25,255

12.625

0.04

1

1

-0.01242

0.102

30-Nov-90

25,255

11.875

1

1

0.06598

-0.063

31-Dec-90

24,464

11.375

1

1

0.02954

-0.044

31-Jan-91

24,464

16

0.04

1

1

0.04904

0.292

28-Feb-91

24,464

18.25

1

1

0.07569

0.123

28-Mar-91

24,464

20.25

1

1

0.02878

0.099

30-Apr-91

24,464

18.125

0.04

1

1

0.00335

-0.115

31-May-91

24,464

22.5

1

1

0.04059

0.194

28-Jun-91

24,435

24.75

1

1

-0.04424

0.091

31-Jul-91

24,435

27.5

0.05

1

1

0.04683

0.102

30-Aug-91

24,435

28.375

1

1

0.02691

0.031

30-Sep-91

25,596

31.125

1

1

-0.01106

0.088

31-Oct-91

25,596

37.75

0.06

1

1

0.01772

0.177

29-Nov-91

25,596

32.75

1

1

-0.03727

-0.153

31-Dec-91

38,394

30.375

3 for 2

3

2

0.10704

0.422

31-Jan-92

38,394

31.875

0.04

1

1

-0.00165

0.048

28-Feb-92

38,394

33.25

1

1

0.01329

0.041

31-Mar-92

38,479

34.625

1

1

-0.02368

0.04

30-Apr-92

38,479

28.5

0.06

1

1

0.01385

-0.213

29-May-92

38,479

28.875

1

1

0.00652

0.013

30-Jun-92

38,626

23.5

1

1

-0.01924

-0.229

31-Jul-92

38,626

24.625

0.06

1

1

0.03993

0.048

31-Aug-92

38,626

22.5

1

1

-0.02076

-0.094

30-Sep-92

38,149

18

1

1

0.01242

-0.25

30-Oct-92

38,149

20.25

0.06

1

1

0.0109

0.114

30-Nov-92

38,149

24.875

1

1

0.04019

0.186

31-Dec-92

37,741

26.125

1

1

0.01754

0.048

29-Jan-93

37,741

30.25

0.06

1

1

0.01233

0.138

26-Feb-93

37,741

32.375

1

1

0.00545

0.066

31-Mar-93

37,741

36.5

1

1

0.02501

0.113

30-Apr-93

37,741

32.75

0.075

1

1

-0.02551

-0.112

28-May-93

37,741

35.25

1

1

0.02942

0.071

30-Jun-93

56,612

28.5

3 for 2

3

2

0.00513

0.263

30-Jul-93

56,612

29

0.05

1

1

-0.00076

0.019

31-Aug-93

56,612

32.875

1

1

0.03934

0.118

30-Sep-93

57,625

34.5

1

1

0.00061

0.047

29-Oct-93

57,625

34.625

0.05

1

1

0.01804

0.005

30-Nov-93

57,815

31.875

1

1

-0.01735

-0.086

31-Dec-93

57,815

32.375

1

1

0.01945

0.015

31-Jan-94

57,815

29.5

0.07

1

1

0.03133

-0.095

28-Feb-94

57,815

27.5

1

1

-0.02409

-0.073

31-Mar-94

57,815

26.875

1

1

-0.04574

-0.023

29-Apr-94

57,815

28.375

0.07

1

1

0.00983

0.055

31-May-94

57,815

30.25

1

1

0.0095

0.062

30-Jun-94

57,114

24.75

1

1

-0.02738

-0.222

29-Jul-94

57,114

26.75

0.07

1

1

0.03041

0.077

31-Aug-94

57,114

30.75

1

1

0.04283

0.13

30-Sep-94

56,829

29.625

1

1

-0.01865

-0.038

31-Oct-94

56,829

35.375

0.07

1

1

0.01487

0.165

30-Nov-94

57,325

31.875

1

1

-0.03707

-0.11

30-Dec-94

57,325

34.875

1

1

0.01275

0.086

31-Jan-95

57,325

40

0.09

1

1

0.02055

0.13

28-Feb-95

57,325

44.375

1

1

0.03962

0.099

31-Mar-95

85,988

32.25

3 for 2

3

2

0.02697

0.124

28-Apr-95

85,988

34.25

0.06

1

1

0.02488

0.06

31-May-95

85,988

35

1

1

0.03416

0.021

30-Jun-95

85,896

43.875

1

1

0.03084

0.202

31-Jul-95

85,896

46.125

0.08

1

1

0.04067

0.051

31-Aug-95

87,061

46.625

1

1

0.00934

0.011

29-Sep-95

174,122

29

2 for 1

2

1

0.03639

0.392

31-Oct-95

174,122

22.875

0.04

1

1

-0.01115

-0.266

30-Nov-95

174,678

24.25

1

1

0.04297

0.057

29-Dec-95

174,678

20.125

1

1

0.0154

-0.205

31-Jan-96

174,678

25.125

0.04

1

1

0.02809

0.201

29-Feb-96

174,678

25.5

1

1

0.01605

0.015

29-Mar-96

174,678

25.875

1

1

0.0112

0.014

30-Apr-96

174,032

24.5

0.04

1

1

0.02513

-0.054

31-May-96

174,032

24.25

1

1

0.02672

-0.01

28-Jun-96

174,989

24.5

1

1

-0.00766

0.01

31-Jul-96

174,989

24.125

0.05

1

1

-0.05339

-0.013

30-Aug-96

174,989

25

1

1

0.03222

0.035

30-Sep-96

175,166

23

1

1

0.05299

-0.087

31-Oct-96

175,166

25

0.05

1

1

0.01394

0.082

29-Nov-96

175,166

30.25

1

1

0.06573

0.174

31-Dec-96

175,173

32

1

1

-0.01135

0.055

31-Jan-97

175,173

37.5

1

1

0.05304

0.147

28-Feb-97

175,173

37.5

0.05

1

1

-0.00088

0.001

31-Mar-97

175,173

32

1

1

-0.04439

-0.172

30-Apr-97

175,068

36.625

1

1

0.04246

0.126

30-May-97

175,068

40.625

0.05

1

1

0.07125

0.1

30-Jun-97

175,813

40.5

1

1

0.0442

-0.003

31-Jul-97

176,422

47

1

1

0.07631

0.138

29-Aug-97

176,422

42.75

0.05

1

1

-0.03645

-0.098

Date

30-Aug-96

29,393

10.5

1

1

1

30-Sep-96

29,539

13.188

1

1

0.2

31-Oct-96

29,539

11.125

1

1

-0.19

29-Nov-96

29,539

10.938

1

1

-0.02

31-Dec-96

29,545

11.5

1

1

0.05

31-Jan-97

29,545

17.625

1

1

0.35

28-Feb-97

29,545

24

1

1

0.27

31-Mar-97

30,440

18

1

1

-0.33

30-Apr-97

30,440

15

1

1

-0.2

30-May-97

30,440

17.625

1

1

0.15

30-Jun-97

30,958

19.625

1

1

0.1

31-Jul-97

30,958

30.5

1

1

0.36

29-Aug-97

30,958

32.125

1

1

0.05

Quick & Reilly

Date

31-Jan-84

6,318

17.625

1

1

29-Feb-84

6,318

15

0.05

1

1

30-Mar-84

6,318

14.875

1

1

30-Apr-84

6,318

17.125

1

1

31-May-84

6,318

17.375

1

1

29-Jun-84

6,318

18

0.05

1

1

31-Jul-84

6,318

14.75

1

1

31-Aug-84

6,318

18

0.05

1

1

28-Sep-84

6,318

17

1

1

31-Oct-84

6,318

17.875

1

1

30-Nov-84

6,318

15.25

0.05

1

1

31-Dec-84

6,318

15.5

1

1

31-Jan-85

6,318

23.375

1

1

28-Feb-85

6,318

23.75

0.11

1

1

29-Mar-85

6,318

23.125

1

1

30-Apr-85

6,318

20.625

1

1

31-May-85

6,318

22.625

0.06

1

1

28-Jun-85

6,318

24

1

1

31-Jul-85

6,318

24.125

1

1

30-Aug-85

6,318

22.875

0.06

1

1

30-Sep-85

6,318

20.125

1

1

31-Oct-85

6,318

22.25

1

1

29-Nov-85

6,318

25.5

0.06

1

1

31-Dec-85

6,318

32.5

1

1

31-Jan-86

6,318

36.375

1

1

28-Feb-86

6,318

39.125

0.17

1

1

31-Mar-86

6,318

39

1

1

30-Apr-86

6,318

30.375

1

1

30-May-86

11,149

33.375

0.07

1

1

30-Jun-86

11,149

35.5

1

1

31-Jul-86

11,149

29

1

1

29-Aug-86

11,149

28.75

0.07

1

1

30-Sep-86

11,149

23.875

1

1

31-Oct-86

11,149

32.125

1

1

28-Nov-86

11,149

29.5

0.07

1

1

31-Dec-86

11,149

26.75

1

1

30-Jan-87

11,149

36.125

1

1

27-Feb-87

11,149

36.875

0.2

1

1

31-Mar-87

11,149

36

1

1

30-Apr-87

16,724

21.375

3 for 2

3

2

29-May-87

16,724

21.5

0.055

1

1

30-Jun-87

9,477

19.25

1

1

31-Jul-87

9,477

20.25

1

1

31-Aug-87

9,477

24.625

0.055

1

1

30-Sep-87

9,477

23

1

1

30-Oct-87

9,477

12.125

1

1

30-Nov-87

9,477

11.625

0.055

1

1

31-Dec-87

9,477

12.5

1

1

29-Jan-88

9,477

12.625

1

1

29-Feb-88

9,477

13.5

0.18

1

1

31-Mar-88

9,452

12.25

1

1

29-Apr-88

9,452

12.625

1

1

31-May-88

9,452

11.5

0.06

1

1

30-Jun-88

9,452

11.875

1

1

29-Jul-88

9,452

11.5

1

1

31-Aug-88

9,452

11.25

0.06

1

1

30-Sep-88

9,452

11.75

1

1

31-Oct-88

9,452

11.75

1

1

30-Nov-88

9,452

11.5

0.06

1

1

30-Dec-88

9,452

10.875

1

1

31-Jan-89

9,452

15

1

1

28-Feb-89

9,452

13.75

0.06

1

1

31-Mar-89

9,452

13.25

1

1

28-Apr-89

9,452

13

1

1

31-May-89

9,452

16.125

0.06

1

1

30-Jun-89

9,452

14

1

1

31-Jul-89

9,452

16.5

1

1

31-Aug-89

9,452

17

0.06

1

1

29-Sep-89

9,452

16.75

1

1

31-Oct-89

9,452

15.75

1

1

30-Nov-89

9,452

14.875

0.06

1

1

29-Dec-89

9,452

13.625

1

1

31-Jan-90

9,452

12

1

1

28-Feb-90

9,452

13.625

0.13

1

1

30-Mar-90

9,452

13.25

1

1

30-Apr-90

9,452

13

1

1

31-May-90

9,452

15.25

0.07

1

1

29-Jun-90

9,452

14

1

1

31-Jul-90

9,452

13.5

1

1

31-Aug-90

9,452

11.375

0.07

1

1

28-Sep-90

9,452

10.375

1

1

31-Oct-90

9,452

9.75

1

1

30-Nov-90

9,452

10.125

0.07

1

1

31-Dec-90

9,437

10.25

1

1

31-Jan-91

9,437

13.125

1

1

28-Feb-91

9,437

16.125

0.07

1

1

28-Mar-91

9,210

18.875

1

1

30-Apr-91

9,210

17.5

1

1

31-May-91

9,210

17.75

0.07

1

1

28-Jun-91

9,452

17

1

1

31-Jul-91

9,452

19.625

1

1

30-Aug-91

9,452

20.625

0.07

1

1

30-Sep-91

9,210

19.25

1

1

31-Oct-91

9,210

20.375

1

1

29-Nov-91

9,210

20

0.07

1

1

31-Dec-91

9,220

27.75

1

1

31-Jan-92

9,220

27.5

1

1

28-Feb-92

9,220

28.5

0.18

1

1

31-Mar-92

9,292

28.625

1

1

30-Apr-92

9,292

21.5

1

1

29-May-92

9,292

21.5

0.08

1

1

30-Jun-92

9,292

21

1

1

31-Jul-92

9,292

20.125

1

1

31-Aug-92

9,292

19.625

0.08

1

1

30-Sep-92

9,884

20.125

1

1

30-Oct-92

9,884

21

1

1

30-Nov-92

9,884

25.375

0.08

1

1

31-Dec-92

9,884

24.75

1

1

29-Jan-93

9,884

27

1

1

26-Feb-93

9,884

26

0.22

1

1

31-Mar-93

9,824

27.125

1

1

30-Apr-93

9,824

25.125

1

1

28-May-93

9,824

26.125

0.1

1

1

30-Jun-93

10,315

28.875

1.443

1

1

30-Jul-93

10,623

30.75

1

1

31-Aug-93

10,623

35

0.1

1

1

30-Sep-93

10,643

36.25

1

1

29-Oct-93

10,643

35.875

1

1

30-Nov-93

10,678

34.25

0.1

1

1

31-Dec-93

11,212

35.75

1.788

1

1

31-Jan-94

10,678

35.375

1

1

28-Feb-94

11,238

28.375

0.27

1

1

31-Mar-94

11,238

25.625

1

1

29-Apr-94

11,238

26.375

1

1

31-May-94

11,238

26.875

0.12

1

1

30-Jun-94

11,168

25.375

1

1

29-Jul-94

11,168

24.75

1

1

31-Aug-94

11,121

29.25

0.12

1

1

30-Sep-94

11,121

25.875

1

1

31-Oct-94

11,111

25.75

1

1

30-Nov-94

11,111

24.75

0.12

1

1

30-Dec-94

11,111

28.375

1

1

31-Jan-95

11,075

30.875

1

1

28-Feb-95

11,075

35

0.29

1

1

31-Mar-95

11,075

35.5

1

1

28-Apr-95

11,075

40.625

1

1

31-May-95

11,075

47

1

1

30-Jun-95

16,613

36.625

0.15

3 for 2

3

2

31-Jul-95

16,613

38.5

1

1

31-Aug-95

16,613

37.375

0.1

1

1

29-Sep-95

16,613

45.875

1

1

31-Oct-95

24,920

23.75

3 for 2

3

2

30-Nov-95

24,952

25.375

0.07

1

1

29-Dec-95

24,952

20.5

1

1

31-Jan-96

25,056

23.25

1

1

29-Feb-96

25,056

26.25

0.08

1

1

29-Mar-96

25,056

29.5

1

1

30-Apr-96

25,056

30.5

1

1

31-May-96

25,056

33.875

0.07

1

1

28-Jun-96

25,056

32.5

1

1

31-Jul-96

25,178

28.375

1

1

30-Aug-96

25,178

29.25

0.08

1

1

30-Sep-96

25,178

26.5

1

1

31-Oct-96

25,178

26.25

1

1

29-Nov-96

25,178

28.375

0.08

1

1

31-Dec-96

25,178

29.875

1

1

31-Jan-97

25,173

36.625

1

1

28-Feb-97

25,173

35

0.19

1

1

31-Mar-97

37,760

20.875

3 for 2

3

2

30-Apr-97

37,760

22.125

1

1

30-May-97

37,760

23

0.06

1

1

30-Jun-97

38,606

23.25

1

1

31-Jul-97

38,664

26.25

## -

1

1

29-Aug-97

38,664

34.25

0.06

1

1

Waterhouse Investor Services

Date

29-May-87

2,572

6.938

1

1

30-Jun-87

2,572

8

1

1

31-Jul-87

2,572

8.25

1

1

31-Aug-87

2,572

7.5

1

1

30-Sep-87

2,572

8

1

1

30-Oct-87

2,572

6.25

1

1

30-Nov-87

2,572

6

1

1

31-Dec-87

2,572

5.25

1

1

29-Jan-88

2,572

4.5

1

1

29-Feb-88

2,482

4.75

1

1

31-Mar-88

2,482

6

1

1

29-Apr-88

2,482

5.875

1

1

31-May-88

2,482

6.25

1

1

30-Jun-88

2,482

5

1

1

29-Jul-88

2,482

3.5

1

1

31-Aug-88

2,482

3.25

1

1

30-Sep-88

2,482

4

1

1

31-Oct-88

2,482

3.375

1

1

30-Nov-88

2,482

3.5

1

1

30-Dec-88

2,482

2.75

1

1

31-Jan-89

2,482

3.75

1

1

28-Feb-89

2,472

3.75

1

1

31-Mar-89

2,472

4.75

1

1

28-Apr-89

2,472

4.25

1

1

31-May-89

2,420

5

1

1

30-Jun-89

2,420

6

1

1

31-Jul-89

2,420

6

1

1

31-Aug-89

2,419

5.75

0.12

1

1

29-Sep-89

2,419

5.625

1

1

31-Oct-89

2,419

5.375

1

1

30-Nov-89

2,417

5

1

1

29-Dec-89

2,417

4.5

1

1

31-Jan-90

2,417

4.375

1

1

28-Feb-90

2,420

3.75

1

1

30-Mar-90

2,420

4.25

1

1

30-Apr-90

2,420

4.375

1

1

31-May-90

2,572

4.25

1

1

29-Jun-90

2,572

4.75

1

1

31-Jul-90

2,572

4.625

1

1

31-Aug-90

2,377

4.375

0.15

1

1

28-Sep-90

2,377

4.25

1

1

31-Oct-90

2,377

4

1

1

30-Nov-90

2,370

3.75

1

1

31-Dec-90

2,370

3.625

1

1

31-Jan-91

2,370

3.75

1

1

28-Feb-91

2,320

4.5

1

1

28-Mar-91

2,320

6.125

1

1

30-Apr-91

2,320

7

1

1

31-May-91

2,320

8.25

1

1

28-Jun-91

2,900

8

5 for 4

5

4

31-Jul-91

2,900

10.375

1

1

30-Aug-91

2,943

10.75

0.16

1

1

30-Sep-91

2,943

14.25

1

1

31-Oct-91

2,943

14

1

1

29-Nov-91

2,943

15.5

1

1

31-Dec-91

2,943

27.5

1

1

31-Jan-92

2,943

26.5

1

1

28-Feb-92

4,415

21.75

3 FOR 2

3

2

31-Mar-92

4,466

25.375

1

1

30-Apr-92

4,466

20.625

1

1

29-May-92

4,466

21.75

1

1

30-Jun-92

4,466

17.125

1

1

31-Jul-92

4,466

17.625

1

1

31-Aug-92

4,466

13.75

0.2

1

1

30-Sep-92

4,847

14.375

1

1

30-Oct-92

4,847

15.625

1

1

30-Nov-92

4,847

20.75

1

1

31-Dec-92

4,847

20.5

1

1

29-Jan-93

4,847

25.25

1

1

26-Feb-93

4,847

24.375

1

1

31-Mar-93

6,071

20.5

5 for 4

5

4

30-Apr-93

6,071

18.5

1

1

28-May-93

6,071

27.25

1

1

30-Jun-93

6,072

33.5

1

1

30-Jul-93

6,072

33

1

1

31-Aug-93

6,072

42.625

0.25

1

1

30-Sep-93

6,072

50.125

1

1

29-Oct-93

6,072

47.25

1

1

30-Nov-93

9,108

25.75

3 FOR 2

3

2

31-Dec-93

9,150

21.25

1

1

31-Jan-94

9,150

21.25

1

1

28-Feb-94

9,150

20.5

1

1

31-Mar-94

9,150

17.625

1

1

29-Apr-94

9,150

16

1

1

31-May-94

9,150

15.25

1

1

30-Jun-94

9,150

13.375

1

1

29-Jul-94

9,150

13

1

1

31-Aug-94

9,150

17

0.2

1

1

30-Sep-94

9,150

14.125

1

1

31-Oct-94

9,150

16.125

1

1

30-Nov-94

9,150

14.25

1

1

30-Dec-94

9,154

12.25

1

1

31-Jan-95

9,154

14.5

1

1

28-Feb-95

9,154

17.375

1

1

31-Mar-95

9,154

16.125

1

1

28-Apr-95

9,154

15.625

1

1

31-May-95

9,154

17.5

1

1

30-Jun-95

9,154

23

1

1

31-Jul-95

9,154

27.625

1

1

31-Aug-95

9,154

28.625

0.25

1

1

29-Sep-95

11,442

25.5

5 for 4

5

4

31-Oct-95

11,442

19.75

1

1

30-Nov-95

11,442

19.75

1

1

29-Dec-95

11,452

24.75

1

1

31-Jan-96

11,452

23.625

1

1

29-Feb-96

11,452

24.625

1

1

29-Mar-96

11,452

33.375

1

1

30-Apr-96

11,452

36.25

1

1

31-May-96

11,458

36.625

1

1

28-Jun-96

11,458

37.125

1

1

31-Jul-96

11,501

37.625

1

1

30-Aug-96

11,501

37.375

0.22

1

1

30-Sep-96

11,501

37.875

1

1

ASSET BETA

Company

Schwab

Quick and Reilly

Waterhouse

Average