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Financial Management Assignment Coursework

Coursework Instructions:

Dear writer,

As you have completed my prior assignment, so i hope you can complete this as well because as you can see, they are related with each other and they need continuity. So here it goes:

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.

Coursework Sample Content Preview:
            Financial Management Author Name Institution Affiliation                       Part 1 The stock’s beta has driven implications for every stock (Mitra & Khanna, 2014). It should be noticed that every stock has a beta of lesser than one and that the beta is expressing the basic tradeoff between reducing risks and increasing returns. If the stock market goes up to 10 percent today, then we can expect the stock to be volatile. For instance, if the stock of the two companies goes up to 10 percent, then the spreadsheet can be referred for knowing the impact of beta.
Calculating Beta Risk
2014 Stock of the First Company  
Beta 0.29
10 percent increase 0.1    
  0.029
  0.319
  0.56480
New Stock Beta 1
2014 Stock of the Second Company  
Beta 0.95
10% increase 0.1
  0.095
  1.045
  1.02225
New Stock Beta 2
The stock whose beta is greater than one will have more standard deviation than the market (Wiedmann & Heckemüller, 2003). Similarly, the stock whose beta is lesser than one will have a smaller standard deviation than the market (2014). We are aware of the fact that the stock with beta leser than 1 cannot move as efficiently as is the requirement of the market. Furthermore, they are not volatile and remain stable. The stock market return of 10 percent will increase the risks which are associated with the stock gains for the firm. With the help of Capital Asset Pricing Model (CAPM), we can easily estimate the cost of equity capital which allows businesses to determine the best way to raise funds while reducing the total cost of capital. Part 2
Monthly stock price of the first company      
Day Monthly stock price (closing) (monthly stock price-average monthly price) square of (monthly stock price-historical average monthly price
1/1/2015 45.71 -4.22167 17.82247
2/1/2015 49.45 -0.48167 0.232003
3/1/2015 48.63 -1.3016 1.694163
4/1/2015 50.44 0.5084 0.258471
5/1/2015 49.44 -0.4916 0.241671
6/1/2015 46.61 -3.3216 11.03303
7/1/2015 46.79 -3.1416 9.869651
8/1/2015 46.01 -3.9216 15.37895
9/1/2015 43.51 -6.4216 41.23695
1/1/2016 49.97 0.0384 0.001475
2/1/2016 50.73 0.7984 0.637443
3/1/2016 54.08 4.1484 17.20922
4/1/2016 50.94
Updated on
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