Description
Hi I need to use Walmart and Target for the following:
Homework Set #3: Chapters 6, 7, & 8
Due Week 6 and worth 100 points
Directions: Answer the following questions on a separate document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link above.
A. Using the two stocks you selected from Homework #1, identify the Beta for each stock. In your own words, what conclusion can you draw from the stocks’ current and historical beta? If the stock market went up 10% today, what would be the impact on each of your stocks?
B. Using the 2014 financial statements from your stocks above and the equations from your textbook, prepare the Historical Average and Standard Deviation for each stock. Click here to view the grading rubric.
Explanation & Answer
Attached.
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Question A
A. Using the two stocks you selected from Homework #1, identify the Beta for each stock.
In your own words, what conclusion can you draw from the stocks’ current and historical
beta? If the stock market went up 10% today, what would be the impact on each of your
stocks?
Equation: Beta = Covariance / Variance
Equation: Beta = Covariance/ Variance = 0.06
Walmart Beta as of 30th April 2017= 0.06
As of 30th April 2017, the calculated current Beta or financial elasticity for Walmart is at
0.0. In making an interpretation of it, this indicates that it is 0.65 % less volatile as the overall
market. Since Walmart’s beta is below 1.0, then we can conclude that the Walmart stock is less
volatile than the underlining index. This way, if the stock market fluctuated with a 10% rise
today on an investment, then the Walmart Company will be expected to gain by 0. 6% (10 X
0.06). This is based on idea that the stock prices in will move with the overall market, however,
in this case, the stock pr...
