Discussion 1: Beta Diving

This week, you have been learning about the process of minimizing risk while maximizing return on investments. You read about several methods for determining the expected rate of return on an individual investment or portfolio. Now you will have the chance to apply what you have learned. This Discussion will focus on the use of one of these measures, the beta coefficient, and how it can be used to measure the level of systematic risk of a particular stock or portfolio in relation to an average asset. Be sure to review this section in your resources prior to beginning this exercise.

First, look up a favorite stock on Yahoo! Finance and make note of the following:

• Stock name
• Stock ticker symbol
• The beta (beta coefficient) for your stockclick on the Key Statistics link in the Yahoo! Finance menu after retrieving your stock symbol.

With this information in mind, consider how the beta coefficient can be used to help determine if you should purchase that stock.

Post byDay 3a response to the following:

• Identify the stock name, ticker symbol, and the beta (beta coefficient) for your stock from Yahoo! Finance.
• Provide your assessment of the beta coefficient as a measurement of risk when you are considering purchasing a stock.
  • What does the beta tell you about your stock?
  • Critique its value as a tool for analyzing stocks.
• In your assessment, consider the limitations of the beta coefficient. What else would you need to consider in deciding whether or not to add the stock to your portfolio? Explain.

General Guidance:Your original post, due byDay 3, will typically be 34 paragraphs in length as a general expectation/estimate. Refer to the Week 2 Discussion 1 rubric for grading elements and criteria. Your Instructor will use the rubric to assess your work.

Return to this Discussion in a few days to read the responses to your initial posting. Note what you have learned and/or any insights you have gained as a result of the comments your colleagues made.

Reada selection of your colleagues posts.

RespondbyDay 5totwo or morecolleagues in one or more of the following ways:

• Share an insight that you gained from reading a colleagues post about how stock risk is analyzed including how it helped your overall understanding of this weeks topics.
• Share a relevant experience with a colleague about how managers would apply beta analysis to financial decision making.
• Offer an example of the use of one of the methods that will further develop the colleagues understanding of how companies can use beta analysis.

General Guidance:Your Discussion responses, dueby Day 5, will each typically be 12 paragraphs in length as a general expectation/estimate. Refer to the Week 2 Discussion 1 rubric for grading elements and criteria. Your Instructor will use the rubric to assess your work.