respond to one or more of the questions below. Keep a couple of things
in mind: this is a 'classroom' discussion so avoid lengthy calculations!
And please respond to the comments of your colleagues!
Government bonds are considered to be 'risk-free' assets. Why, then, do
they give a return? Are they truly completely free of risk?
On January 27, 2010, Steve Jobs took the stage to announce, as
expected, a new addition to the Apple's (AAPL) product line. The iPad, a
tablet computer, recevied good reviews but the stock price fell from a
close of $205.94 on January 26th to $192.06 by the weekend. In the same
period, the Nasdaq index went from 2203.73 to 2147.35.
Why would the price of AAPL fall just when the company announces an exciting new product?
Comment on what part
of the move in AAPL's price was systematic and what part was intrinsic.
Assume that AAPL has a beta of 1.28 versus the Nasdaq index.