201-046 Cost of Capital at Ameritra

Exhibit 1 Consolidated Annual Income Statements for the Fiscal Year Ending in September
1997 1996
Net Revenues
Transaction Income $ 51,936,902.00 $ 36,469,561.00
Net Interest 18,193,946 11,477,878
Other 7,107,492 6,391,314
Total Net Revenues 77,238,340 54,338,753

Expenses Excluding Interest

Employee Compensation 19,290,808 14,049,642
Commissions and Clearance 3,320,262 2,530,642
Communications 5,623,468 3,685,535
Occupancy and Equipment Cost 5,422,839 2,889,654
Advertising and Promotion 13,970,834 7,537,265
Provision for Losses 59,000 148,014
Amortization of Goodwill 363,002 363,002
Other 7,763,014 4,717,406
Total Expenses Excluding Interest 55,813,227 35,921,160

Income Before Income Taxes 21,425,113 18,417,593

Taxes 7,602,964 7,259,248

Net Income $ 13,822,149 $ 11,158,345

EPS $1.00 $0.87

Shares Outstanding 13,768,889 12,813,823

Source: Ameritrade Annual Report, 1997.

Cost of Capital at Ameritrade

1995

$ 23,977,481.00
8,434,584
2,607,538
35,019,603

8,481,977
2,516,796
2,352,590
1,626,725
4,842,392
1,428,663
94,152
2,846,280
24,189,575

10,830,028

3,798,881

$ 7,031,147

$0.55

12,813,823
Cost of Capital at Ameritrade 201-046

Exhibit 2 Consolidated Annual Balance Sheets for the Fiscal Year Ending in September
1997 1996

ASSETS
Cash & Gash Equivalents $ 53,522,447.00 $ 15,767,170.00
Cash & Investments Segregated in Compliance with Federal Regulations 319,763,921 175,668,497
Receivable from Brokers, Dealers, & Clearing Organizations 17,823,640 15,096,862
Receivable from Customers & Correspondents 325,407,147 166,075,055
Furniture, Equipment, & Leasehold Improvements 8,709,923 3,746,178
Goodwill 6,346,763 6,709,765
Equity Investments 7,597,972 7,157,783
Other Investments 5,000,000 5,000,000
Deferred Income Taxes 39,314 444,378
Other Assets 13,145,616 6,013,544

Total Assets $ 757,356,743 $ 401,679,232

LIABILITIES & STOCKHOLDERS EQUITY

Liabilities:
Payable to Brokers, Dealers, & Clearing Organizations 1,404,999 1,193,479
Payable to Customers & Correspondents 666,279,440 356,942,970
Accounts Payable and Accrued Liabilities 19,252,931 7,221,008
Notes Payable to Bank - 4,853,000
Income Taxes Payable 3,430,279 806,711

Total Liabilities 690,367,649 371,017,168

Stockholder’s Equity:
Class A Common Stock 131,534 114,494
Class B Common Stock 13,644 13,644
Additional Paid in Capital 23,297,506 809,665
Retained Earnings 43,546,410 29,724,261

Total Stockholder’s Equity 66,989,094 30,662,064

Total Liabilities & Stockholders Equity $ 757,356,743 $ 401,679,232

Source: Ameritrade Annual Report, 1997.

201-046 Cost of Capital at Am

Exhibit 3 Capital Market Return Data (Historical and Current)

Prevailing Yields on US Government Securities (August 31, 1997)

Annualized Yield to Maturity

3-Month T-BiIls 5.24%

1-Year Bonds 5.59%
5-Year Bonds 6.22%
10-Year Bonds 6.34%
20-Year Bonds 6.69%
30-Year Bonds 6.61%

Historic Average Total Annual Returns on US Government Securities and Common Stocks (1950 -1996)
Average Annual Return Standard Deviation
T-Bills 5.2% 3.0%
Intermediate Bonds a 6.4% 6.6%
Long Term Bonds b 6.0% 10.8%
Large Company Stocks c 14.0% 16.8%
Small Company Stocks d 17.8% 25.6%

Historic Average Total Annual Returns on US Government Securities and Common Stocks (1929 - 1996)
Average Annual Return Standard Deviation
T-Bills 3.8% 3.3%
Intermediate Bonds a 5.4% 5.8%
Long Term Bonds b 5.5% 9.2%
Large Company Stocks c 12.7% 20.3%
Small Company Stocks d 17.7% 34.1%

Source: Yields are from Datastream, historical data are from lbbotson Associates, SBBI 2000 Yearbook.
a Portfolio of US Government bonds with maturity near 5 years.
b Portfolio of US Government bonds with maturity near 20 years.
c Standard and Poor’s 500 Stock Price Index.
d A subset of small cap stocks traded on the NYSE (1926-1981); Dimensional Fund Advisor’s Small Company Fund (1982-1997).
 Cost of Capital at Ameritrade

dard Deviation

dard Deviation
Exhibit 4 Selected Data for Comparable Firms
Debt/Value Debt/Value
(Market Values) (Book Values)
Firm Name (Industry) Current Avg 1992-1996 Current Avg 1992-1996

A G Edwards (Investment Services) a 0.00 0.00 0.00 0.00

Bear Stearns (Investment Services) 0.60 0.50 0.69 0.60
Charles Schwab Corp (Discount Brokerage) 0.05 0.08 0.25 0.30
E*Trade (Discount Brokerage) 0.00 NA 0.00 NA
Lehman Brothers (Investment Services) 0.79 NA 0.80 0.79 b
Mecklermedia (Internet) 0.00 0.00 b 0.00 0.00 b
Merrill Lynch & Co (Investment Services) 0.57 0.52 0.77 0.65
Morgan Stanley Dean Witter (Investment Services) 0.57 0.53 0.70 0.63
Netscape (Internet) 0.00 NA 0.00 NA
Paine Webber (Investment Service) 0.51 0.53 0.63 0.58
Quick & Reilly Group (Discount Brokerage) 0.00 0.00 0.00 0.00
Raymond James Financial (Investment Services) 0.05 0.04 0.07 0.06
Waterhouse Investor Srvcs (Discount Brokerage) NA 0.38 NA 0.70 c
Yahoo (Internet) 0.00 NA 0.00 NA

Source: Compustat; Standard & Poor’s; company public filings

a lnvestment Services includes brokerage, asset management, investment banking, and trading.
b Indicates average over 1993-1996.
c indicates average over 1992-1995
201-046 -7-

Brokerage
Revenues (%)

57
35
82 These companies
95 are similar to
13 Ameritrade
0
37
12
0
46
81
51
99
0
201-046 Cost of Capital at Ameritrade

Exhibit 5 Stock Price Data for Discount Brokers

Ameritrade
Date Shares Price Dividend Stock Split

31-Mar-97 13,153 15.625

30-Apr-97 13,153 12.500 -0.200
30-May-97 13,153 14.000 0.120
30-Jun-97 14,518 15.750 0.125
31-Jul-97 14,518 15.375 -0.024
29-Aug-97 14,518 18.813 0.224

Charles Schwab
Date Shares Price Dividend Stock Split
30-Sep-87 29,121 15.875
30-Oct-87 29,121 7.875 -0.504
30-Nov-87 29,121 6.625 -0.159
31-Dec-87 25,388 6.000 -0.094
29-Jan-88 25,388 6.500 0.083
29-Feb-88 25,388 9.000 0.385
31 -Mar-88 25,388 7.375 -0.181
29-Apr-88 25,388 7.625 0.034
31-May-88 25,388 6.875 -0.098
30-Jun-88 25,294 7.250 0.055
29-Jul-88 25,294 7.500 0.034
31-Aug-88 25,294 6.750 -0.100
30-Sep-88 25,328 6.750 0.000
31-Oct-88 25,328 7.500 0.111
30-Nov-88 25,328 6.750 -0.100
30-Dec-88 25,354 6.750 0.000
29-Jan-89 25,354 10.250 0.519
29-Feb-89 25,354 8.625 -0.159
32 -Mar-88 25,354 8.875 0.029
29-Apr-89 25,354 10.125 0.1408
31-May-89 25,354 11.750 0.030 0.1635
30-Jun-89 25,352 11.000 -0.0638
29-Jul-89 25,352 16.500 0.030 0.5027
31-Aug-89 25,352 15.750 -0.0455
30-Sep-89 25,386 14.000 -0.1111
31-Oct-89 25,386 13.000 0.030 -0.0693
30-Nov-89 25,386 12.500 -0.0385
30-Dec-89 25,332 13.875 0.1100
29-Jan-90 25,332 13.500 0.030 -0.0249
29-Feb-90 25,332 15.250 0.1296
33 -Mar-88 25,332 17.000 0.1148
29-Apr-90 25,332 15.125 0.030 -0.1085
31-May-90 25,332 15.750 0.0413
30-Jun-90 25,099 15.250 -0.0317
29-Jul-90 25,099 13.625 0.030 -0.1046
31-Aug-90 25,099 12.625 -0.0734
30-Sep-90 25,255 11.375 -0.0990
31-Oct-90 25,255 12.625 0.040 0.1134
30-Nov-90 25,255 11.875 -0.0594
30-Dec-90 24,464 11.375 -0.0421
29-Jan-91 24,464 16.000 0.040 0.4101
29-Feb-91 24,464 18.250 0.1406
34 -Mar-88 24,464 20.250 0.1096
29-Apr-91 24,464 18.125 0.040 -0.103
31-May-91 24,464 22.500 0.241
30-Jun-91 24,435 24.750 0.100
29-Jul-91 24,435 27.500 0.050 0.113
31-Aug-91 24,435 28.375 0.032
30-Sep-91 25,596 31.125 0.097
31-Oct-91 25,596 37.750 0.060 0.215
30-Nov-91 25,596 32.750 -0.132
30-Dec-91 38,394 30.375 3 for 2 0.391 3
29-Jan-92 38,394 31.875 0.040 0.051
29-Feb-92 38,394 33.250 0.043
35 -Mar-88 38,479 34.625 0.041
29-Apr-92 38,479 28.500 0.060 -0.175
31-May-92 38,479 28.875 0.013
30-Jun-92 38,626 23.500 -0.186
29-Jul-92 38,626 24.625 0.060 0.050
31-Aug-92 38,626 22.500 -0.086
30-Sep-92 38,149 18.000 -0.200
31-Oct-92 38,149 20.250 0.060 0.128
30-Nov-92 38,149 24.875 0.228
30-Dec-92 37,741 26.125 0.050
29-Jan-93 37,741 30.250 0.060 0.160
29-Feb-93 37,741 32.375 0.070
36 -Mar-88 37,741 36.500 0.127
29-Apr-93 37,741 32.750 0.075 -0.101
31-May-93 37,741 35.250 0.076
30-Jun-93 56,612 28.500 3 for 2 0.213 3
29-Jul-93 56,612 29.000 0.050 0.019
31-Aug-93 56,612 32.875 0.134
30-Sep-93 57,625 34.500 0.049
31-Oct-93 57,625 34.625 0.050 0.005
30-Nov-93 57,815 31.875 -0.079
30-Dec-93 57,815 32.375 0.016
29-Jan-94 57,815 29.500 0.070 -0.087
29-Feb-94 57,815 27.500 -0.068
37 -Mar-88 57,815 26.875 -0.023
29-Apr-94 57,815 28.375 0.070 0.058
31-May-94 57,815 30.250 0.066
30-Jun-94 57,114 24.750 -0.182
29-Jul-94 57,114 26.750 0.070 0.084
31-Aug-94 57,114 30.750 0.150
30-Sep-94 56,829 29.625 -0.037
31-Oct-94 56,829 35.375 0.070 0.196
30-Nov-94 57,325 31.875 -0.099
30-Dec-94 57,325 34.875 0.094
29-Jan-95 57,325 40.000 0.090 0.150
29-Feb-95 57,325 44.375 0.109
38 -Mar-88 85,988 32.250 3 for 2 0.090 3
29-Apr-95 85,988 34.250 0.060 0.064
31-May-95 85,988 35.000 0.022
30-Jun-95 85,896 43.875 0.254
29-Jul-95 85,896 46.125 0.080 0.053
31-Aug-95 87,061 46.625 0.011
30-Sep-95 174,122 29.000 2 for 1 0.244 2
31-Oct-95 174,122 22.875 0.040 -0.210
30-Nov-95 174,678 24.250 0.060
30-Dec-95 174,678 20.125 -0.170
29-Jan-96 174,678 25.125 0.040 0.250
29-Feb-96 174,678 25.500 0.015
39 -Mar-88 174,678 25.875 0.015
29-Apr-96 174,032 24.500 0.040 -0.052
31-May-96 174,032 24.250 -0.010
30-Jun-96 174,989 24.500 0.010
29-Jul-96 174,989 24.125 0.050 -0.013
31-Aug-96 174,989 25.000 0.036
30-Sep-96 175,166 23.000 -0.080
31-Oct-96 175,166 25.000 0.050 0.089
30-Nov-96 175,166 30.250 0.210
30-Dec-96 175,173 32.000 0.058
29-Jan-97 175,173 37.500 0.172
29-Feb-97 175,173 37.500 0.050 0.001
40 -Mar-88 175,173 32.000 -0.147
29-Apr-97 175,068 36.625 0.145
31-May-97 175,068 40.625 0.050 0.111
30-Jun-97 175,813 40.500 -0.003
29-Jul-97 176,422 47.000 0.160
31-Aug-97 176,422 42.750 0.050 -0.089
Jan 92-Dec 96
0.036 0.03345
0.148 0.11513

E*Trade
Date Shares Price Dividend Stock Split
30-Aug-96 29,393 10.500
30-Sep-96 29,539 13.188 0.256
31-Oct-96 29,539 11.125 -0.156
29-Nov-96 29,539 10.938 -0.017
31-Dec-96 29,545 11.500 0.051
31-Jan-97 29,545 17.625 0.533
28-Feb-97 29,545 24.000 0.362
31-Mar-97 30,440 18.000 -0.250
30-Apr-97 30,440 15.000 -0.167
30-May-97 30,440 17.625 0.175
30-Jun-97 30,958 19.625 0.113
31-Jul-97 30,958 30.500 0.554
29-Aug-97 30,958 32.125 0.053

Quick & Reilly

Date Shares Price Dividend Stock Split

31-Jan-84 6,318 17.625

29-Feb-84 6,318 15.000 0.050 -0.146
30-Mar-84 6,318 14.875 -0.008
30-Apr-84 6,318 17.125 0.151
31-May-84 6,318 17.375 0.015
29-Jun-84 6,318 18.000 0.050 0.039
31-Jul-84 6,318 14.750 -0.181
31-Aug-84 6,318 18.000 0.050 0.224
28-Sep-84 6,318 17.000 -0.056
31-Oct-84 6,318 17.875 0.051
30-Nov-84 6,318 15.250 0.050 -0.144
31-Dec-84 6,318 15.500 0.016
31-Jan-85 6,318 23.375 0.508
29-Feb-85 6,318 23.750 0.110 0.021
30-Mar-85 6,318 23.125 -0.026
30-Apr-85 6,318 20.625 -0.108
31-May-85 6,318 22.625 0.060 0.100
29-Jun-85 6,318 24.000 0.061
31-Jul-85 6,318 24.125 0.005
31-Aug-85 6,318 22.875 0.060 -0.049
28-Sep-85 6,318 20.125 -0.120
31-Oct-85 6,318 22.250 0.106
30-Nov-85 6,318 25.500 0.060 0.149
31-Dec-85 6,318 32.500 0.275
31-Jan-86 6,318 36.375 0.119
29-Feb-86 6,318 39.125 0.170 0.080
30-Mar-86 6,318 39.000 -0.003
30-Apr-86 6,318 30.375 -0.221
31-May-86 11,149 33.375 0.070 0.101
29-Jun-86 11,149 35.500 0.064
31-Jul-86 11,149 29.000 -0.183
31-Aug-86 11,149 28.750 0.070 -0.006
28-Sep-86 11,149 23.875 -0.170
31-Oct-86 11,149 32.125 0.346
30-Nov-86 11,149 29.500 0.070 -0.080
31-Dec-86 11,149 26.750 -0.093
31-Jan-87 11,149 36.125 0.350
29-Feb-87 11,149 36.875 0.200 0.026
30-Mar-87 11,149 36.000 -0.024 x
30-Apr-87 16,724 21.375 3 for 2 -0.109 3
31-May-87 16,724 21.500 0.055 0.008
29-Jun-87 9,477 19.250 -0.105
31-Jul-87 9,477 20.250 0.052
31-Aug-87 9,477 24.625 0.055 0.219
28-Sep-87 9,477 23.000 -0.066
31-Oct-87 9,477 12.125 -0.473
30-Nov-87 9,477 11.625 0.055 -0.037
31-Dec-87 9,477 12.500 0.075
31-Jan-88 9,477 12.625 0.010
29-Feb-88 9,477 13.500 0.180 0.084
30-Mar-88 9,452 12.250 -0.093
30-Apr-88 9,452 12.625 0.031
31-May-88 9,452 11.500 0.060 -0.084
29-Jun-88 9,452 11.875 0.033
31-Jul-88 9,452 11.500 -0.032
31-Aug-88 9,452 11.250 0.060 -0.017
28-Sep-88 9,452 11.750 0.044
31-Oct-88 9,452 11.750 0.000
30-Nov-88 9,452 11.500 0.060 -0.016
31-Dec-88 9,452 10.875 -0.054
31-Jan-89 9,452 15.000 0.379
29-Feb-89 9,452 13.750 0.060 -0.079
30-Mar-89 9,452 13.250 -0.036
30-Apr-89 9,452 13.000 -0.019
31-May-89 9,452 16.125 0.060 0.245
29-Jun-89 9,452 14.000 -0.132
31-Jul-89 9,452 16.500 0.179
31-Aug-89 9,452 17.000 0.060 0.034
28-Sep-89 9,452 16.750 -0.015
31-Oct-89 9,452 15.750 -0.060
30-Nov-89 9,452 14.875 0.060 -0.052
31-Dec-89 9,452 13.625 -0.084
31-Jan-90 9,452 12.000 -0.119
29-Feb-90 9,452 13.625 0.130 0.146
30-Mar-90 9,452 13.250 -0.028
30-Apr-90 9,452 13.000 -0.019
31-May-90 9,452 15.250 0.070 0.178
29-Jun-90 9,452 14.000 -0.082
31-Jul-90 9,452 13.500 -0.036
31-Aug-90 9,452 11.375 0.070 -0.152
28-Sep-90 9,452 10.375 -0.088
31-Oct-90 9,452 9.750 -0.060
30-Nov-90 9,452 10.125 0.070 0.046
31-Dec-90 9,437 10.250 0.012
31-Jan-91 9,437 13.125 0.280
29-Feb-91 9,437 16.125 0.070 0.234
30-Mar-91 9,210 18.875 0.171
30-Apr-91 9,210 17.500 -0.073
31-May-91 9,210 17.750 0.070 0.018
29-Jun-91 9,452 17.000 -0.042
31-Jul-91 9,452 19.625 0.154
31-Aug-91 9,452 20.625 0.070 0.055
28-Sep-91 9,210 19.250 -0.067
31-Oct-91 9,210 20.375 0.058
30-Nov-91 9,210 20.000 0.070 -0.015
31-Dec-91 9,220 27.750 0.388
31-Jan-92 9,220 27.500 -0.009
29-Feb-92 9,220 28.500 0.180 0.043
30-Mar-92 9,292 28.625 0.004
30-Apr-92 9,292 21.500 -0.249
31-May-92 9,292 21.500 0.080 0.004
29-Jun-92 9,292 21.000 -0.023
31-Jul-92 9,292 20.125 -0.042
31-Aug-92 9,292 19.625 0.080 -0.021
28-Sep-92 9,884 20.125 0.025
31-Oct-92 9,884 21.000 0.043
30-Nov-92 9,884 25.375 0.080 0.212
31-Dec-92 9,884 24.750 -0.025
31-Jan-93 9,884 27.000 0.091
29-Feb-93 9,884 26.000 0.220 -0.029
30-Mar-93 9,824 27.125 0.043
30-Apr-93 9,824 25.125 -0.074
31-May-93 9,824 26.125 0.100 0.044
29-Jun-93 10,315 28.875 1.443 0.160
31-Jul-93 10,623 30.750 0.065
31-Aug-93 10,623 35.000 0.100 0.141
28-Sep-93 10,643 36.250 0.036
31-Oct-93 10,643 35.875 -0.010
30-Nov-93 10,678 34.250 0.100 -0.043
31-Dec-93 11,212 35.750 1.788 0.096
31-Jan-94 10,678 35.375 -0.010
29-Feb-94 11,238 28.375 0.270 -0.190
30-Mar-94 11,238 25.625 -0.097
30-Apr-94 11,238 26.375 0.029
31-May-94 11,238 26.875 0.120 0.024
29-Jun-94 11,168 25.375 -0.056
31-Jul-94 11,168 24.750 -0.025
31-Aug-94 11,121 29.250 0.120 0.187
28-Sep-94 11,121 25.875 -0.115
31-Oct-94 11,111 25.750 -0.005
30-Nov-94 11,111 24.750 0.120 -0.034
31-Dec-94 11,111 28.375 0.146
31-Jan-95 11,075 30.875 0.088
29-Feb-95 11,075 35.000 0.290 0.143
30-Mar-95 11,075 35.500 0.014
30-Apr-95 11,075 40.625 0.144
31-May-95 11,075 47.000 0.157
29-Jun-95 16,613 36.625 0.150 3for2 0.174 3
31-Jul-95 16,613 38.500 0.051
31-Aug-95 16,613 37.375 0.100 -0.027
28-Sep-95 16,613 45.875 0.227
31-Oct-95 24,920 23.750 3 for 2 -0.223 3
30-Nov-95 24,952 25.375 0.070 0.071
31-Dec-95 24,952 20.500 -0.192
31-Jan-96 25,056 23.250 0.134
29-Feb-96 25,056 26.250 0.080 0.132
30-Mar-96 25,056 29.500 0.124
30-Apr-96 25,056 30.500 0.034
31-May-96 25,056 33.875 0.070 0.113
29-Jun-96 25,056 32.500 -0.041
31-Jul-96 25,178 28.375 -0.127
31-Aug-96 25,178 29.250 0.080 0.034
28-Sep-96 25,178 26.500 -0.094
31-Oct-96 25,178 26.250 -0.009
30-Nov-96 25,178 28.375 0.080 0.084
31-Dec-96 25,178 29.875 0.053
31-Jan-97 25,173 36.625 0.226
29-Feb-97 25,173 35.000 0.190 -0.039
30-Mar-97 37,760 20.875 3 for 2 -0.105 3
30-Apr-97 37,760 22.125 0.060
31-May-97 37,760 23.000 0.060 0.042
29-Jun-97 38,606 23.250 0.011
31-Jul-97 38,664 26.250 0.129
31-Aug-97 38,664 34.250 0.060 0.307

Waterhouse Investor Services

Date Shares Price Dividend Stock Split
29-May-87 2,572 6.938
30-Jun-87 2,572 8.000 0.153
31-Jul-87 2,572 8.250 0.031
31-Aug-87 2,572 7.500 -0.091
30-Sep-87 2,572 8.000 0.067
30-Oct-87 2,572 6.250 -0.219
30-Nov-87 2,572 6.000 -0.040
31-Dec-87 2,572 5.250 -0.125
29-Jan-88 2,572 4.500 -0.143
29-Feb-88 2,482 4.750 0.056
31-Mar-88 2,482 6.000 0.263
29-Apr-88 2,482 5.875 -0.021
31-May-88 2,482 6.250 0.064
30-Jun-88 2,482 5.000 -0.200
29-Jul-88 2,482 3.500 -0.300
31-Aug-88 2,482 3.250 -0.071
30-Sep-88 2,482 4.000 0.231
31-Oct-88 2,482 3.375 -0.156
30-Nov-88 2,482 3.500 0.037
30-Dec-88 2,482 2.750 -0.214
31-Jan-89 2,482 3.750 0.364
28-Feb-89 2,472 3.750 0.000
31 -Mar-89 2,472 4.750 0.267
28-Apr-89 2,472 4.250 -0.105
31-May-89 2,420 5.000 0.176
30-Jun-89 2,420 6.000 0.200
31 -Jul-89 2,420 6.000 0.000
31-Aug-89 2,419 5.750 0.120 -0.022
29-Sep-89 2,419 5.625 -0.022
31-Oct-89 2,419 5.375 -0.044
30-Nov-89 2,417 5.000 -0.070
29-Dec-89 2,417 4.500 -0.100
31-Jan-90 2,417 4.375 -0.028
28-Feb-90 2,420 3.750 -0.143
30-Mar-90 2,420 4.250 0.133
30-Apr-90 2,420 4.375 0.029
31-May-90 2,572 4.250 -0.029
29-Jun-90 2,572 4.750 0.118
31-Jul-90 2,572 4.625 -0.026
31-Aug-90 2,377 4.375 0.150 -0.022
28-Sep-90 2,377 4.250 -0.029
31-Oct-90 2,377 4.000 -0.059
30-Nov-90 2,370 3.750 -0.063
31-Dec-90 2,370 3.625 -0.033
31 -Jan-91 2,370 3.750 0.034
28-Feb-91 2,320 4.500 0.200
28-Mar-91 2,320 6.125 0.361
30-Apr-91 2,320 7.000 0.143
31-May-91 2,320 8.250 0.179
28-Jun-91 2,900 8.000 5 for 4 0.212 5
31-Jul-91 2,900 10.375 0.297
30-Aug-91 2,943 10.750 0.160 0.052
30-Sep-91 2,943 14.250 0.326
31-Oct-91 2,943 14.000 -0.018
29-Nov-91 2,943 15.500 0.107
31 -Dec-91 2,943 27.500 0.774
31 -Jan-92 2,943 26.500 -0.036
28-Feb-92 4,415 21.750 3 for 2 0.231 3
31-Mar-92 4,466 25.375 0.167
30-Apr-92 4,466 20.625 -0.187
29-May-92 4,466 21.750 0.055
30-Jun-92 4,466 17.125 -0.213
31 -Jul-92 4,466 17.625 0.029
31-Aug-92 4,466 13.750 0.200 -0.209
30-Sep-92 4,847 14.375 0.045
30-Oct-92 4,847 15.625 0.087
30-Nov-92 4,847 20.750 0.328
31-Dec-92 4,847 20.500 -0.012
29-Jan-93 4,847 25.250 0.232
26-Feb-93 4,847 24.375 -0.035
31-Mar-93 6,071 20.500 5 for 4 0.051 5
30-Apr-93 6,071 18.500 -0.098
28-May-93 6,071 27.250 0.473
30-Jun-93 6,072 33.500 0.229
30-Jul-93 6,072 33.000 -0.015
31 -Aug-93 6,072 42.625 0.250 0.299
30-Sep-93 6,072 50.125 0.176
29-Oct-93 6,072 47.250 -0.057
30-Nov-93 9,108 25.750 3 for 2 -0.183 3
31-Dec-93 9,150 21.250 -0.175
31-Jan-94 9,150 21.250 0.000
28-Feb-94 9,150 20.500 -0.035
31-Mar-94 9,150 17.625 -0.140
29-Apr-94 9,150 16.000 -0.092
31-May-94 9,150 15.250 -0.047
30-Jun-94 9,150 13.375 -0.123
29-Jul-94 9,150 13.000 -0.028
31-Aug-94 9,150 17.000 0.200 0.323
30-Sep-94 9,150 14.125 -0.169
31-Oct-94 9,150 16.125 0.142
30-Nov-94 9,150 14.250 -0.116
30-Dec-94 9,154 12.250 -0.140
31-Jan-95 9,154 14.500 0.184
28-Feb-95 9,154 17.375 0.198
31-Mar-95 9,154 16.125 -0.072
28-Apr-95 9,154 16.125 0.000
31-May-95 9.154 17.500 0.085
30-Jun-95 9,154 23.000 0.314
31-Jul-95 9,154 27.625 0.201
31-Aug-95 9,154 28.625 0.250 0.045
29-Sep-95 11,442 25.500 5 for 4 0.114 5
31-Oct-95 11,442 19.750 -0.225
30-Nov-95 11,442 19.750 0.000
29- Dec-95 11,452 24.750 0.253
31-Jan-96 11,452 23.625 -0.045
29- Feb-96 11,452 24.625 0.042
29-Mar-96 11,452 33.375 0.355
30-Apr-96 11,452 36.250 0.086
31-May-96 11,458 36.625 0.010
28-Jun-96 11,458 37.125 0.014
 31-Jul-96 11,501 37.625 0.013
30-Aug-96 11,501 37.375 0.220 -0.001
30-Sep-96 11,501 37.875 0.013

Source: Center for Research on Security Prices, University of Chicago.

t of Capital at Ameritrade
 Split adjustment
2

2
 2

an 92-Dec 96
y
2
2

2
4

2
4

4
Exhibit 6 Stock Return Data for Investment Service Firms, Internet Firms, and the Aggregate Stock Market

Morgan VW NYSE, EW NYSE,

Date A G Edwards Bear Stearns Lehman Bros Meckler- Merrill Lynch Stanley Dean Netscape Paine Raymond Yahoo AMEX, & AMEX, &
media Witter Webber James Nasdaq a Nasdaq a

31-Jan-84 0.026040 -0.013280 -0.042860 0.040000 -0.012910 0.005760

29-Feb-84 -0.111680 -0.167330 -0.175370 -0.102560 -0.039170 -0.053810
30-Mar-84 -0.042290 -0.019140 0.073300 -0.050000 0.013450 0.007100
30-Apr-84 0.012050 -0.011710 0.080510 -0.067670 0.002730 -0.019420
31-May-84 -0.017860 -0.044780 -0.113730 -0.072580 -0.052350 -0.050770
29-Jun-84 0.100610 0.119790 0.084960 -0.043480 0.023590 0.013800
31-Jul-84 0.016670 -0.076280 -0.090160 0.018180 -0.020350 -0.047450
31-Aug-84 0.178140 0.304570 0.189190 0.214290 0.112570 0.089620
28-Sep-84 -0.032710 -0.077820 -0.105300 -0.029410 0.000390 0.000270
31-Oct-84 0.024150 0.023630 0.029790 0.015150 0.000130 -0.020890
30-Nov-84 -0.066040 -0.091290 -0.041320 -0.179100 -0.010620 -0.031410
31-Dec-84 -0.017170 -0.013700 -0.046550 -0.054550 0.023790 0.005050
31-Jan-85 0.331610 0.277780 0.431820 0.430770 0.085730 0.122760
28-Feb-85 -0.007780 -0.023190 -0.022220 0.027030 0.017000 0.047140
29-Mar-85 -0.036860 -0.085820 0.026620 0.013160 -0.001930 -0.008530
30-Apr-85 -0.094260 -0.034290 -0.123810 -0.025970 -0.002180 -0.011290
31-May-85 0.085970 0.089360 0.065220 0.013330 0.055870 0.022930
28-Jun-85 0.102500 0.011720 -0.040140 0.039470 0.017190 0.003470
31-Jul-85 -0.064640 0.040930 -0.092530 0.017720 -0.000540 0.019510
30-Aug-85 -0.036590 -0.052240 -0.038430 0.025000 -0.004800 -0.003410
30-Sep-85 -0.132490 -0.141730 -0.049180 -0.048780 -0.039650 -0.056140
31-Oct-85 0.088240 0.100920 0.008620 0.000000 0.044570 0.018960
29-Nov-85 0.099100 -0.103450 0.127500 0.197440 0.256410 0.069270 0.053270
31-Dec-85 0.141800 0.193590 0.022300 0.003580 0.015920 0.043060 0.029130
31-Jan-86 0.039710 0.156760 0.152730 0.107140 0.288890 0.009860 0.043400
28-Feb-86 0.149310 0.130840 0.036590 0.068390 0.103450 0.072840 0.062360
31-Mar-86 0.083990 0.128720 0.012230 0.036360 0.171880 0.053880 0.047720
30-Apr-86 -0.086830 0.065640 -0.102720 0.051150 -0.137430 -0.100000 -0.008060 0.015840
30-May-86 0.026070 0.003620 -0.008080 0.013420 0.051530 -0.007410 0.050810 0.036630
30-Jun-86 -0.066370 -0.168520 -0.054610 -0.062910 -0.116500 -0.040600 0.014300 0.008960
31-Jul-86 -0.067630 -0.141920 -0.039710 -0.070670 -0.010990 -0.187500 -0.059690 -0.073610
29-Aug-86 0.104660 0.160310 0.145110 0.149050 0.175930 0.038460 0.066390 0.022110
30-Sep-86 -0.094340 -0.145530 -0.052810 -0.119400 -0.015590 -0.092590 -0.079140 -0.060490
31-Oct-86 0.151040 0.217050 0.195120 0.160830 0.172690 0.081630 0.049440 0.024620
28-Nov-86 -0.022620 -0.057320 -0.074050 -0.030890 -0.075210 -0.056600 0.015170 -0.006280
31-Dec-86 -0.040740 -0.102160 -0.075950 -0.129190 -0.063200 -0.026800 -0.026540 -0.034530
30-Jan-87 0.334950 0.318180 0.198630 0.112910 0.178570 0.319590 0.128370 0.116820
27-Feb-87 0.000000 -0.022990 -0.015430 -0.048610 -0.033540 0.289060 0.047630 0.074950
31-Mar-87 0.044950 -0.024650 -0.002920 0.036500 -0.003500 0.261940 0.023240 0.033090
30-Apr-87 -0.122380 -0.121020 -0.152050 0.005280 -0.084210 -0.116400 -0.017130 -0.019610
29-May-87 -0.023900 -0.028990 -0.041380 0.020320 -0.061150 -0.101800 0.005220 0.000710
30-Jun-87 -0.104650 0.022090 0.010870 -0.003440 0.020490 -0.031200 0.043830 0.022010
31-Jul-87 0.073390 -0.007350 0.100360 0.023490 0.052210 -0.062070 0.044050 0.034700
31-Aug-87 0.027180 0.103700 0.032570 0.069370 0.023050 0.169120 0.037230 0.015590
30-Sep-87 -0.071130 0.080270 -0.031750 0.023730 -0.029960 -0.142640 -0.020740 -0.015510
30-Oct-87 -0.337840 -0.400000 -0.357380 -0.337560 -0.474900 -0.352940 -0.224870 -0.270850
30-Nov-87 -0.174420 -0.145830 -0.153060 -0.163930 -0.021760 -0.113640 -0.072900 -0.052300
31-Dec-87 0.033330 0.023900 0.091460 0.148460 -0.128790 -0.038460 0.070410 0.027940
29-Jan-88 0.080650 0.144580 0.072630 -0.019510 0.113040 0.137600 0.045340 0.078110
29-Feb-88 0.062390 0.157890 0.062500 0.168660 0.109690 -0.035290 0.051610 0.062010
31-Mar-88 -0.035460 -0.054550 -0.064360 0.055560 -0.078010 0.089270 -0.017060 0.034370
29-Apr-88 0.029410 0.019420 0.000000 0.106880 -0.038460 -0.067420 0.011000 0.015250
31-May-88 -0.042860 -0.085710 0.031750 -0.086240 0.032320 -0.048190 0.000940 -0.017020
30-Jun-88 0.159400 0.093750 0.113990 0.275100 0.070310 -0.008610 0.051390 0.048480
29-Jul-88 -0.006490 -0.067310 0.013950 0.004720 -0.036500 0.025640 -0.007180 0.000550
31-Aug-88 -0.039220 -0.041240 -0.050460 -0.015720 0.038180 -0.050000 -0.027940 -0.023710
30-Sep-88 0.084080 0.028670 0.039020 -0.003190 0.036760 0.017370 0.037280 0.018700
31-Oct-88 -0.006330 0.084210 0.051640 0.051280 -0.028370 0.157630 0.017650 -0.011780
30-Nov-88 -0.057320 0.029130 -0.049550 -0.036700 -0.065400 -0.069770 -0.016400 -0.036700
30-Dec-88 0.042970 -0.038100 -0.090050 0.053970 0.015750 0.105000 0.020800 0.019540
31-Jan-89 0.169930 0.178220 0.270830 0.078310 0.116280 0.193180 0.065940 0.063130
28-Feb-89 -0.044690 0.001010 -0.037190 0.032400 0.028060 0.051430 -0.016360 0.002790
31-Mar-89 -0.038830 0.025420 -0.047210 0.006110 -0.047620 -0.009090 0.021550 0.017030
28-Apr-89 -0.006130 -0.041320 0.040540 -0.055060 0.014290 0.018350 0.048530 0.030680
31-May-89 0.154320 0.068710 0.060610 0.137630 0.070700 0.090090 0.039650 0.027370
30-Jun-89 -0.003420 0.034190 -0.061730 -0.017010 -0.026490 0.069420 -0.004980 -0.008330
31-Jul-89 0.178380 0.107440 0.232460 0.110000 0.258500 0.147290 0.077720 0.031610
31-Aug-89 0.087160 0.034850 -0.039430 0.062610 0.016430 -0.013510 0.022280 0.019290
29-Sep-89 0.008270 -0.083970 -0.108210 -0.063830 -0.160430 0.009590 -0.001750 0.004470
31-Oct-89 -0.148150 -0.075000 -0.025100 -0.069580 -0.121020 -0.122450 -0.029380 -0.050950
30-Nov-89 0.103260 -0.034950 -0.086580 0.050940 -0.014200 0.015500 0.017850 -0.008220
29-Dec-89 -0.096750 0.009430 -0.004740 -0.071810 0.000000 -0.061070 0.018280 -0.012170
31-Jan-90 -0.115380 -0.028040 -0.133330 -0.077370 -0.037040 -0.012360 -0.070050 -0.045810
28-Feb-90 0.055900 0.060770 0.000000 0.029540 0.038770 0.148760 0.014980 0.015750
30-Mar-90 0.137410 -0.038460 -0.033330 0.008200 0.044780 0.075400 0.024150 0.022040
30-Apr-90 -0.104170 -0.020000 -0.034480 0.028460 -0.042860 -0.013420 -0.028160 -0.026720
31-May-90 0.203490 0.179290 0.138550 0.129220 0.119700 0.118910 0.088870 0.046650
29-Jun-90 -0.007920 -0.009170 -0.047620 0.024650 0.013420 -0.036590 -0.004300 0.005380
31-Jul-90 -0.058820 -0.083330 0.061110 -0.163230 -0.066230 0.000000 -0.009380 -0.027290
31-Aug-90 -0.081460 -0.097780 -0.132280 -0.068180 -0.113190 -0.101270 -0.091730 -0.109790
28-Sep-90 -0.268570 -0.142860 -0.091460 -0.121950 -0.096770 -0.116340 -0.053870 -0.080490
31-Oct-90 0.046880 -0.097220 -0.046980 -0.012630 -0.151790 -0.048000 -0.012420 -0.056330
30-Nov-90 0.119400 0.124920 0.107140 0.092780 0.126740 0.084030 0.065980 0.036650
31-Dec-90 0.095730 0.125000 0.070970 0.025940 0.037740 0.144500 0.029540 -0.003870
31-Jan-91 0.202450 0.135800 0.186750 0.101150 0.054550 0.074830 0.049040 0.085250
28-Feb-91 0.168370 0.142610 0.172590 0.184870 0.319310 0.219240 0.075690 0.133650
28-Mar-91 0.136940 0.125000 0.218340 0.177300 0.197370 0.270830 0.028780 0.077820
30-Apr-91 0.019310 0.034190 0.089610 -0.015060 0.054950 0.057380 0.003350 0.031020
31-May-91 0.075760 0.094630 0.086090 0.087560 -0.041460 0.063950 0.040590 0.030340
28-Jun-91 -0.099720 -0.128000 -0.064020 -0.103110 -0.142080 -0.041090 -0.044240 -0.034500
31-Jul-91 0.198820 0.110090 0.081430 0.161200 0.095540 0.034290 0.046830 0.034920
30-Aug-91 0.025220 -0.014880 0.018180 0.029970 0.081630 0.038670 0.026910 0.028570
30-Sep-91 0.202900 0.016950 0.148810 0.063490 0.118920 0.114260 -0.011060 0.008670
31-Oct-91 0.076310 0.058330 0.072540 0.081290 0.202900 0.105260 0.017720 0.023860
29-Nov-91 -0.126870 -0.039760 -0.067630 -0.016170 -0.152610 -0.125540 -0.037270 -0.025390
31-Dec-91 0.299660 0.182610 0.231770 0.197180 0.335070 0.217820 0.107040 0.036450
31-Jan-92 -0.056110 0.066180 -0.031710 -0.110040 -0.016040 0.165530 -0.001650 0.149480
28-Feb-92 -0.066430 0.080000 -0.019650 -0.008850 0.080430 -0.003500 0.013290 0.052010
31-Mar-92 -0.088760 -0.077420 -0.015660 -0.013390 -0.045450 0.128840 -0.023680 -0.014120
30-Apr-92 -0.163220 -0.006990 -0.109090 -0.110860 -0.142860 -0.135510 0.013850 -0.032890
29-May-92 0.098770 0.006690 -0.004080 0.050690 0.049140 -0.086490 0.006520 0.005500
30-Jun-92 -0.078430 -0.022220 0.041240 -0.024330 0.023670 -0.014910 -0.019240 -0.039700
31-Jul-92 -0.006130 -0.045450 0.019800 0.097260 0.069360 0.006020 0.039930 0.027280
31-Aug-92 0.043460 -0.014290 -0.030580 -0.075180 -0.135350 -0.071860 -0.020760 -0.024440
30-Sep-92 -0.071430 0.016260 0.020150 -0.051850 -0.106920 -0.113030 0.012420 0.011930
30-Oct-92 0.115380 0.024000 0.093830 0.031250 0.140850 0.116790 0.010900 0.016320
30-Nov-92 0.166670 0.100390 0.095710 0.075560 0.197280 0.209150 0.040190 0.067730
31-Dec-92 -0.063840 0.045110 -0.014490 0.051890 0.010360 -0.032430 0.017540 0.035650
29-Jan-93 0.089950 -0.014390 0.098740 0.015700 0.035900 0.137650 0.012330 0.066740
26-Feb-93 -0.019420 -0.005840 0.046650 0.022080 -0.054650 -0.137930 0.005450 -0.007910
31-Mar-93 0.080200 0.081480 0.045870 0.110500 0.089470 0.043660 0.025010 0.030880
30-Apr-93 -0.050690 0.089040 -0.010530 -0.064450 -0.072460 0.005490 -0.025510 -0.012760
28-May-93 -0.052430 0.133330 0.079430 0.102300 0.136460 0.038250 0.029420 0.037950
30-Jun-93 0.051550 0.050280 0.069310 0.051440 0.073730 0.003370 0.005130 0.011970
30-Jul-93 0.063730 0.026600 0.074070 0.019890 0.034330 -0.057890 -0.000760 0.014100
31-Aug-93 0.010140 0.039900 0.118970 0.179360 0.067220 0.154410 0.039340 0.040400
30-Sep-93 0.082570 0.042110 0.010310 0.049770 0.019530 0.087380 0.000610 0.025790
29-Oct-93 0.046610 -0.111110 -0.007400 -0.096260 -0.099620 -0.035710 0.018040 0.040090
30-Nov-93 -0.032390 0.018180 -0.063230 -0.084010 -0.088510 -0.027780 -0.017350 -0.024370
31-Dec-93 -0.032970 -0.016850 -0.074380 -0.013940 0.014080 -0.050000 0.019450 0.016120
31-Jan-94 0.016300 0.114290 0.073210 0.121910 0.097220 0.064960 0.031330 0.048920
28-Feb-94 -0.048130 -0.106670 -0.094710 -0.156850 -0.097050 -0.070920 -0.024090 -0.009490
31-Mar-94 -0.190340 -0.098270 -0.045050 -0.083080 -0.039400 -0.047010 -0.048550 -0.045740 -0.046020
29-Apr-94 -0.013990 0.083330 0.000000 -0.010070 -0.037110 -0.007410 -0.040320 0.009830 -0.010820
31-May-94 0.071770 0.019820 0.905660 0.063860 -0.025560 -0.007760 -0.003030 0.009500 -0.000270
30-Jun-94 -0.080000 -0.165640 -0.166670 -0.128710 -0.102560 -0.048120 -0.053030 -0.016950 -0.027380 -0.026570
29-Jul-94 0.014490 -0.051470 0.050000 -0.011360 0.046430 0.065930 0.032000 -0.068970 0.030410 0.015470
31-Aug-94 0.150000 0.141090 0.039680 -0.275860 0.115490 0.155460 0.015190 0.185190 0.042830 0.036790
30-Sep-94 -0.086210 -0.123290 -0.092310 -0.031750 -0.147690 -0.109320 -0.115380 -0.026250 -0.018650 0.004500
31-Oct-94 0.013700 0.015630 0.050850 -0.311480 0.143830 0.052310 0.060870 -0.032260 0.014870 -0.002400
30-Nov-94 -0.060000 -0.029230 -0.037100 -0.071430 -0.034920 -0.091010 -0.098690 -0.041670 -0.037070 -0.040570
30-Dec-94 0.043480 -0.016000 -0.008400 0.410260 -0.059210 -0.002110 0.100920 -0.026090 0.012750 -0.012860
31-Jan-95 0.020830 0.081300 0.152540 -0.181820 0.030910 0.019070 0.000000 0.095710 0.020550 0.027710
28-Feb-95 0.224490 0.136840 0.069120 0.155560 0.119450 0.120580 0.166330 0.163930 0.039620 0.027990
31-Mar-95 -0.016000 -0.013330 -0.006900 0.730770 0.036590 0.004750 -0.071940 -0.023100 0.026970 0.018740
28-Apr-95 0.039770 0.114860 0.083330 0.566670 0.070590 0.031540 0.062020 0.014490 0.024880 0.025980
31-May-95 -0.010930 0.038180 0.015380 0.517730 0.038680 0.095320 0.160290 0.050000 0.034160 0.020500
30-Jun-95 0.000660 0.055560 0.107590 0.411210 0.117020 0.077180 -0.044300 0.059320 0.030840 0.048690
31-Jul-95 0.088890 0.035090 0.017140 -0.006620 0.057140 0.023720 0.086090 0.122580 0.040670 0.055180
31-Aug-95 -0.005100 -0.061020 0.064040 0.126670 0.042970 0.038860 -0.055120 0.011490 0.009340 0.030380
29-Sep-95 0.098050 0.042420 -0.015870 -0.112430 0.084600 0.116550 0.262630 0.025970 -0.007270 0.036390 0.025990
31-Oct-95 -0.042250 -0.075580 -0.064520 -0.373330 -0.112000 -0.099790 0.408000 0.120250 -0.011490 -0.011150 -0.040580
30-Nov-95 0.065100 0.101890 0.042530 0.510640 0.004680 -0.008620 0.571020 0.011070 0.052330 0.042970 0.017200
29-Dec-95 -0.115740 -0.086210 -0.060770 -0.098590 -0.081080 -0.065220 0.005420 -0.101120 -0.056570 0.015400 0.009780
31-Jan-96 0.052360 0.157230 0.205880 -0.185550 0.120290 0.185740 0.181650 0.037500 0.035290 0.028090 0.033290
29-Feb-96 -0.034830 0.060870 -0.032200 -0.155880 0.013190 -0.015750 -0.379000 -0.036390 0.005680 0.016050 0.031540
29-Mar-96 0.032370 0.020620 0.080810 0.090910 0.054230 0.109330 -0.186270 0.106920 0.021240 0.011200 0.024120
30-Apr-96 -0.055280 0.015150 -0.051400 0.333330 -0.006170 -0.030290 0.469880 -0.051140 0.005560 0.025130 0.057330
31-May-96 0.090430 0.014180 -0.032510 0.156250 0.077430 -0.014930 0.115780 0.053650 0.005520 -0.058820 0.026720 0.061050
28-Jun-96 0.064780 -0.020730 0.010200 0.094590 0.005790 -0.007580 -0.085400 0.085710 -0.001320 -0.250000 -0.007660 -0.030600
31-Jul-96 0.009220 -0.047620 -0.065660 -0.172840 -0.068330 -0.004070 -0.365460 -0.115790 -0.077350 -0.142860 -0.053390 -0.078620
30-Aug-96 0.022830 0.045560 -0.084320 0.044780 0.014490 -0.020510 -0.104430 -0.012140 0.119760 0.090280 0.032220 0.044770
30-Sep-96 0.045890 -0.005350 0.224850 0.028570 0.075510 0.041880 0.310950 0.018180 0.041500 0.082800 0.052990 0.028970
31-Oct-96 0.025750 0.016130 -0.028990 -0.034720 0.066410 0.013570 -0.045820 0.119050 0.005150 -0.070590 0.013940 -0.019970
29-Nov-96 0.046030 0.170370 0.161190 0.165470 0.146620 0.196520 0.262710 0.154260 0.164100 -0.031650 0.065730 0.024770
31-Dec-96 0.081120 0.013640 0.077250 -0.024690 0.015580 -0.049900 0.017900 0.041290 0.065550 -0.111110 -0.011350 -0.001420
31-Jan-97 0.011150 0.076230 0.007970 0.050630 0.032210 0.003500 -0.334070 0.280000 0.070540 0.992650 0.053040 0.061720
28-Feb-97 0.044120 0.055000 0.065140 0.337350 0.144730 0.105030 -0.231020 -0.089580 0.034880 -0.107010 -0.000880 -0.010430
31-Mar-97 -0.128730 -0.125000 -0.130110 -0.135140 -0.105470 -0.069310 0.032190 -0.134100 -0.050040 -0.070250 -0.044390 -0.047880
30-Apr-97 0.138210 0.161900 0.162390 0.062500 0.110920 0.077870 -0.099790 0.203540 0.108700 0.213330 0.042460 -0.021390
30-May-97 0.060710 0.070490 0.207650 -0.245100 0.115790 0.075250 0.092380 0.048530 0.176470 -0.054950 0.071250 0.085170
30-Jun-97 0.156360 0.051920 -0.012200 -0.012990 0.125000 0.046820 0.084570 -0.014080 -0.001640 0.093020 0.044200 0.044240
31-Jul-97 -0.011700 0.199270 0.231480 0.065790 0.181340 0.220960 0.144250 0.148210 0.057080 0.602840 0.076310 0.048620
29-Aug-97 -0.059170 -0.031400 -0.121600 -0.006170 -0.124050 -0.082240 0.085180 -0.043550 0.002160 0.053100 -0.036450 0.027020

Source: Center for Research on Security Prices, University of Chicago.

aVW (EW) NYSE, AMEX, & Nasdaq” represents the value-weighted (equal-weighted) index of all US publicly traded firms.
Returns Charles Schwab Quick & Reilly Waterhouse Investor Services
31-Jan-84
29-Feb-84 -0.146
30-Mar-84 -0.008
30-Apr-84 0.151
31-May-84 0.015
29-Jun-84 0.039
31-Jul-84 -0.181
31-Aug-84 0.224
28-Sep-84 -0.056
31-Oct-84 0.051
30-Nov-84 -0.144
31-Dec-84 0.016
31-Jan-85 0.508
28-Feb-85 0.021
29-Mar-85 -0.026
30-Apr-85 -0.108
31-May-85 0.100
28-Jun-85 0.061
31-Jul-85 0.005
30-Aug-85 -0.049
30-Sep-85 -0.120
31-Oct-85 0.106
29-Nov-85 0.149
31-Dec-85 0.275
31-Jan-86 0.119
28-Feb-86 0.080
31-Mar-86 -0.003
30-Apr-86 -0.221
30-May-86 0.101
30-Jun-86 0.064
31-Jul-86 -0.183
29-Aug-86 -0.006
30-Sep-86 -0.170
31-Oct-86 0.346
28-Nov-86 -0.080
31-Dec-86 -0.093
30-Jan-87 0.350
27-Feb-87 0.026
31-Mar-87 -0.024
30-Apr-87 -0.109
29-May-87 0.008
30-Jun-87 -0.105 0.153
31-Jul-87 0.052 0.031
31-Aug-87 0.219 -0.091
30-Sep-87 -0.066 0.067
30-Oct-87 -0.504 -0.473 -0.219
30-Nov-87 -0.159 -0.037 -0.040
31-Dec-87 -0.094 0.075 -0.125
29-Jan-88 0.083 0.010 -0.143
29-Feb-88 0.385 0.084 0.056
31 -Mar-88 -0.181 -0.093 0.263
29-Apr-88 0.034 0.031 -0.021
31-May-88 -0.098 -0.084 0.064
30-Jun-88 0.055 0.033 -0.200
29-Jul-88 0.034 -0.032 -0.300
31-Aug-88 -0.100 -0.017 -0.071
30-Sep-88 0.000 0.044 0.231
31-Oct-88 0.111 0.000 -0.156
30-Nov-88 -0.100 -0.016 0.037
30-Dec-88 0.000 -0.054 -0.214
29-Jan-89 0.519 0.379 0.364
29-Feb-89 -0.159 -0.079 0.000
32 -Mar-88 0.029 -0.036 0.267
29-Apr-89 0.141 -0.019 -0.105
31-May-89 0.163 0.245 0.176
30-Jun-89 -0.064 -0.132 0.200
29-Jul-89 0.503 0.179 0.000
31-Aug-89 -0.045 0.034 -0.022
30-Sep-89 -0.111 -0.015 -0.022
31-Oct-89 -0.069 -0.060 -0.044
30-Nov-89 -0.038 -0.052 -0.070
30-Dec-89 0.110 -0.084 -0.100
29-Jan-90 -0.025 -0.119 -0.028
29-Feb-90 0.130 0.146 -0.143
33 -Mar-88 0.115 -0.028 0.133
29-Apr-90 -0.109 -0.019 0.029
31-May-90 0.041 0.178 -0.029
30-Jun-90 -0.032 -0.082 0.118
29-Jul-90 -0.105 -0.036 -0.026
31-Aug-90 -0.073 -0.152 -0.022
30-Sep-90 -0.099 -0.088 -0.029
31-Oct-90 0.113 -0.060 -0.059
30-Nov-90 -0.059 0.046 -0.063
30-Dec-90 -0.042 0.012 -0.033
29-Jan-91 0.410 0.280 0.034
29-Feb-91 0.141 0.234 0.200
34 -Mar-88 0.110 0.171 0.361
29-Apr-91 -0.103 -0.073 0.143
31-May-91 0.241 0.018 0.179
30-Jun-91 0.100 -0.042 0.212
29-Jul-91 0.113 0.154 0.297
31-Aug-91 0.032 0.055 0.052
30-Sep-91 0.097 -0.067 0.326
31-Oct-91 0.215 0.058 -0.018
30-Nov-91 -0.132 -0.015 0.107
30-Dec-91 0.391 0.388 0.774
29-Jan-92 0.051 -0.009 -0.036
29-Feb-92 0.043 0.043 0.231
35 -Mar-88 0.041 0.004 0.167
29-Apr-92 -0.175 -0.249 -0.187
31-May-92 0.013 0.004 0.055
30-Jun-92 -0.186 -0.023 -0.213
29-Jul-92 0.050 -0.042 0.029
31-Aug-92 -0.086 -0.021 -0.209
30-Sep-92 -0.200 0.025 0.045
31-Oct-92 0.128 0.043 0.087
30-Nov-92 0.228 0.212 0.328
30-Dec-92 0.050 -0.025 -0.012
29-Jan-93 0.160 0.091 0.232
29-Feb-93 0.070 -0.029 -0.035
36 -Mar-88 0.127 0.043 0.051
29-Apr-93 -0.101 -0.074 -0.098
31-May-93 0.076 0.044 0.473
30-Jun-93 0.213 0.160 0.229
29-Jul-93 0.019 0.065 -0.015
31-Aug-93 0.134 0.141 0.299
30-Sep-93 0.049 0.036 0.176
31-Oct-93 0.005 -0.010 -0.057
30-Nov-93 -0.079 -0.043 -0.183
30-Dec-93 0.016 0.096 -0.175
29-Jan-94 -0.087 -0.010 0.000
29-Feb-94 -0.068 -0.190 -0.035
37 -Mar-88 -0.023 -0.097 -0.140
29-Apr-94 0.058 0.029 -0.092
31-May-94 0.066 0.024 -0.047
30-Jun-94 -0.182 -0.056 -0.123
29-Jul-94 0.084 -0.025 -0.028
31-Aug-94 0.150 0.187 0.323
30-Sep-94 -0.037 -0.115 -0.169
31-Oct-94 0.196 -0.005 0.142
30-Nov-94 -0.099 -0.034 -0.116
30-Dec-94 0.094 0.146 -0.140
29-Jan-95 0.150 0.088 0.184
29-Feb-95 0.109 0.143 0.198
38 -Mar-88 0.090 0.014 -0.072
29-Apr-95 0.064 0.144 0.000
31-May-95 0.022 0.157 0.085
30-Jun-95 0.254 0.174 0.314
29-Jul-95 0.053 0.051 0.201
31-Aug-95 0.011 -0.027 0.045
30-Sep-95 0.244 0.227 0.114
31-Oct-95 -0.210 -0.223 -0.225
30-Nov-95 0.060 0.071 0.000
30-Dec-95 -0.170 -0.192 0.253
29-Jan-96 0.250 0.134 -0.045
29-Feb-96 0.015 0.132 0.042
39 -Mar-88 0.015 0.124 0.355
29-Apr-96 -0.052 0.034 0.086
31-May-96 -0.010 0.113 0.010
 30-Jun-96 0.010 -0.041 0.014
29-Jul-96 -0.013 -0.127 0.013
31-Aug-96 0.036 0.034 -0.001
30-Sep-96 -0.080 -0.094 0.013
31-Oct-96 0.089 -0.009
30-Nov-96 0.210 0.084
30-Dec-96 0.058 0.053
29-Jan-97 0.172 0.226
29-Feb-97 0.001 -0.039
40 -Mar-88 -0.147 -0.105
29-Apr-97 0.145 0.060
31-May-97 0.111 0.042
30-Jun-97 -0.003 0.011
29-Jul-97 0.160 0.129
31-Aug-97 -0.089 0.307

There are many different methods of calculating beta

Different indices and different lengths of time

This table shows betas for different indices and different lenghts

Betas
Levered Charles Schwab Quick & Reilly Waterhouse Investor Services
full period
VW 2.34 2.18 1.40
EW 1.74 1.90 1.35

5yr 92-96
VW 2.30 2.20 3.18
EW 1.36 1.43 2.17

5yr most recent

VW 2.24 1.79 3.22
EW 1.49 1.88 2.84

2yr most recent

VW 2.04 1.13 0.63
EW 1.09 1.89 0.94

We must remember that betas obtained from stocks correspond to EQUITY betas and thus include financial risk

We use leverage and the Hamada equation to unlever the betas

Leverage
d/v 0.080 0.000 0.380
d/e 0.087 0.000 0.613

Unlevered
Betas Charles Schwab Quick & Reilly Waterhouse Investor Services
 full period
Assuming VW 2.21 2.18 1.00
35% tax rate EW 1.65 1.90 0.96

5yr 92-96
VW 2.17 2.20 2.27
EW 1.29 1.43 1.55

5yr most recent

VW 2.12 1.79 2.30
EW 1.41 1.88 2.03

2yr most recent

VW 1.93 1.13 0.45
EW 1.03 1.89 0.67

Using the CAPM model to get the cost of capital for the project

Risk free rate

Reasonable approach is to use the current yield on long term government bonds

If we assume that the project will last for 10 years, we use 10 yr y

Market risk premium

One possible approach to estimate the market risk premium:

Historical average annual return of large stocks minus that of long term US government bonds o
estimate = 12.7-5.5
From exhibit 3
0.072
Using this definition of Market premium

the estimated cost for the project would be

k = 0.0634 + 0.072* 2.2

or k = 0.0634 + 0.072* 2.07

Cost of capital for the project would oscilate ar

depending on the specific value of Rf and the m

Another possible approach to estimate the market risk premium

Follow authors' idea that the market premium in the present day is between 4 and 6 percent

Use 5%
 0.050
Using this definition of Market premium

the estimated cost for the project would be

k = 0.0634 + 0.05*2.2
or k = 0.0634 + 0.05* 2.07

Cost of capital for the project would oscilate ar

depending on the specific value of Rf and the m

Conclusion
The cost of capital for the project is high.
The estimated cost of capital represents the risk of real investments in the discount brokerage i
The discount brokerage business has very high systematic risk. All of the revenues are linked to

If Ameritrade uses debt to finance the project, the cost of capital may fall but the equity beta (an
VWI EWI
-0.012910 0.005760
-0.039170 -0.053810
0.013450 0.007100
0.002730 -0.019420
-0.052350 -0.050770
0.023590 0.013800
-0.020350 -0.047450
0.112570 0.089620
0.000390 0.000270
0.000130 -0.020890
-0.010620 -0.031410
0.023790 0.005050
0.085730 0.122760
0.017000 0.047140
-0.001930 -0.008530
-0.002180 -0.011290
0.055870 0.022930
0.017190 0.003470
-0.000540 0.019510
-0.004800 -0.003410
-0.039650 -0.056140
0.044570 0.018960
0.069270 0.053270
0.043060 0.029130
0.009860 0.043400
0.072840 0.062360
0.053880 0.047720
-0.008060 0.015840
0.050810 0.036630
0.014300 0.008960
-0.059690 -0.073610
0.066390 0.022110
-0.079140 -0.060490
0.049440 0.024620
0.015170 -0.006280
-0.026540 -0.034530
0.128370 0.116820
0.047630 0.074950
0.023240 0.033090
-0.017130 -0.019610
0.005220 0.000710
0.043830 0.022010
0.044050 0.034700
0.037230 0.015590
-0.020740 -0.015510
-0.225 -0.271
-0.073 -0.052
0.070 0.028
0.045 0.078
 0.052 0.062
-0.017 0.034
0.011 0.015
0.001 -0.017
0.051 0.048
-0.007 0.001
-0.028 -0.024
0.037 0.019
0.018 -0.012
-0.016 -0.037
0.021 0.020
0.066 0.063
-0.016 0.003
0.022 0.017
0.049 0.031
0.040 0.027
-0.005 -0.008
0.078 0.032
0.022 0.019
-0.002 0.004
-0.029 -0.051
0.018 -0.008
0.018 -0.012
-0.070 -0.046
0.015 0.016
0.024 0.022
-0.028 -0.027
0.089 0.047
-0.004 0.005
-0.009 -0.027
-0.092 -0.110
-0.054 -0.080
-0.012 -0.056
0.066 0.037
0.030 -0.004
0.049 0.085
0.076 0.134
0.029 0.078
0.003 0.031
0.041 0.030
-0.044 -0.035
0.047 0.035
0.027 0.029
-0.011 0.009
0.018 0.024
-0.037 -0.025
0.107 0.036
-0.002 0.149
0.013 0.052
-0.024 -0.014
 0.014 -0.033
0.007 0.006
-0.019 -0.040
0.040 0.027
-0.021 -0.024
0.012 0.012
0.011 0.016
0.040 0.068
0.018 0.036
0.012 0.067
0.005 -0.008
0.025 0.031
-0.026 -0.013
0.029 0.038
0.005 0.012
-0.001 0.014
0.039 0.040
0.001 0.026
0.018 0.040
-0.017 -0.024
0.019 0.016
0.031 0.049
-0.024 -0.009
-0.046 -0.046
0.010 -0.011
0.010 0.000
-0.027 -0.027
0.030 0.015
0.043 0.037
-0.019 0.005
0.015 -0.002
-0.037 -0.041
0.013 -0.013
0.021 0.028
0.040 0.028
0.027 0.019
0.025 0.026
0.034 0.021
0.031 0.049
0.041 0.055
0.009 0.030
0.036 0.026
-0.011 -0.041
0.043 0.017
0.015 0.010
0.028 0.033
0.016 0.032
0.011 0.024
0.025 0.057
0.027 0.061
 -0.008 -0.031
-0.053 -0.079
0.032 0.045
0.053 0.029
0.014 -0.020
0.066 0.025
-0.011 -0.001
0.053 0.062
-0.001 -0.010
-0.044 -0.048
0.042 -0.021
0.071 0.085
0.044 0.044
0.076 0.049
-0.036 0.027

Beta obtained using 60 months

as suggested in the book

Beta obtained using 60 months

as suggested in the book

us include financial risk from leverage

from Exhibit 4
 Avg
1.80
1.50

2.22 Beta obtained using 60 months

1.42 as suggested in the book

2.07 Beta obtained using 60 months

1.77 as suggested in the book

1.17
1.20

0 years, we use 10 yr yield 0.0634

From exhibit 3

US government bonds over the longer period (29-96)

Market premium

he project would be

0.223
0.212

roject would oscilate around 22%

fic value of Rf and the method to get beta

een 4 and 6 percent

Market premium

he project would be

0.174
0.167

roject would oscilate around 17%

fic value of Rf and the method to get beta

he discount brokerage industry

revenues are linked to stock market activity and performance

l but the equity beta (and the cost of equity) will increase with the level of leverage used.