Set against a one-year target of 40.10, a composite freight broker's expected 11.65 percent meets three different required returns in the MT422 beta and CAPM analysis for Unit 5. Searches like "mt 422 unit 5 assignment example", "mt422 unit 5 sample" and "mt422 unit 5 example" land here.
What a finished MT422 Unit 5 beta and CAPM analysis looks like
Five pages, built around a regression table and a security market line chart. The data section describes sixty monthly returns for the composite broker and a broad market index, with the stock's annualized deviation at 26.54 percent and the index at 15.75. The full-period regression gives a beta of 1.38, a standard error of 0.13 and an R-squared of 0.67, so about two-thirds of the stock's variance moves with the market. Split in half, the windows give 1.05 and 1.67. Expected return comes from a supplied target of 40.10 and a 0.54 dividend on a 36.40 price: 11.65 percent. With the risk-free rate bracketed at [4.2] percent and the premium at [5.5], the required return is 11.79 on the full beta, 9.98 on the early one and 13.38 on the late one.
How a MT422 Unit 5 example is structured
The analysis keeps two questions apart: how much market risk the stock carries, and whether its expected return pays for it. Estimation comes first, with stock returns regressed on index returns, the slope read as beta and its standard error turned into a 95 percent band of 1.13 to 1.63. The split-window test follows, and the paper considers why a broker's sensitivity might have risen as freight volumes turned more cyclical, while conceding that the change could be noise. Pricing comes second. Both the risk-free rate and the premium are bracketed with their sources, and a required return is computed for each beta. Expected return is derived separately, from price, target and dividend. A chart places all three required returns on the security market line beside the single expected return, and a break-even table shows the premium, 5.40 percent, at which the full-period verdict flips.
Sixty months, one slope
Beta of 1.38 with a standard error of 0.13, and a band from 1.13 to 1.63 that the later verdict has to respect.
Two halves that disagree
Thirty early months give 1.05 and thirty late ones 1.67, with a paragraph on whether the business changed or only the sample did.
Expected return from the case
A 36.40 price, a 40.10 one-year target and a 0.54 dividend imply 11.65 percent, derived apart from anything the model says.
Required return, three ways
At bracketed inputs of 4.2 and 5.5 percent, the three betas require 9.98, 11.79 and 13.38 percent respectively.
The premium that flips the verdict
A premium of 5.40 percent closes the full-period gap, and a price of 36.35 would leave the stock exactly fair.
Where marks go in MT422 Unit 5
The most frequent confusion in these analyses is treating the CAPM result as a forecast, when it is the return the stock's market risk requires. Graders then check the premium: plugging in the market's total return where the excess return belongs inflates every required figure. Betas pulled from a website with no period, frequency or index cannot be tested, and a single estimate presented as exact ignores the band sixty months produce. Papers that spot the stock sitting above or below the line and stop there, without testing how sensitive that position is to the premium or the window, give a verdict the data cannot carry. Interpretation should stay on pricing. A recommendation to buy the broker's shares moves outside the unit's question, which asks what the model implies about the expected return, not what anyone should hold.
Get a MT422 Unit 5 example written to your instructions
Working from a named stock rather than a composite one? Give the ticker, the window and the index the Unit 5 prompt specifies, and a free first MT422 beta and CAPM analysis follows within 24-48h, regression shown, inputs bracketed with sources and the verdict tested against the rubric's questions. Composite data works equally well.
MT422 Unit 5 questions, answered
Where should the risk-free rate and market premium come from?
The risk-free rate usually comes from a Treasury yield with its date, and many sections name the maturity they want. The premium is a judgment; published surveys and historical averages give ranges rather than one figure. Stating both with sources, and showing how the conclusion changes across a plausible premium range, reads far better than a single unexplained number.
Is a beta from a financial website acceptable?
Sometimes, if the site's method is named: the period, the return frequency and the index used. Many instructors prefer an estimate the student runs, because website betas differ from one another for exactly those reasons. Running the regression also produces the standard error, which a quoted figure never shows and which strengthens the interpretation.
What does it mean if the stock plots above the security market line?
Its expected return exceeds what its beta requires, which the model reads as underpricing. That conclusion is only as strong as the expected return, the beta and the premium behind it, so the better analyses test each. A gap smaller than the uncertainty in those inputs is usually described as no clear mispricing at all.