the discussion will examine your individual risk tolerance through a survey on Investment Risk Tolerance Assessment
This week, the discussion will examine your individual risk tolerance through a survey on Investment Risk Tolerance Assessment. Then, you will select investments that closely match your Risk Tolerance. In addition, you will analyze both Sam’s and Martin’s Risk Tolerance and select an investment for each of them that matches their individual risk tolerance.
Before you begin, be sure to review the following narrated lecture:
Instructions
To see how discussions are graded, click the vertical ellipsis ( ) and select Show Rubric or refer to your instructor’s guidelines.
For more information about discussion grading criteria, visit the Graduate Discussion Participation Policies and Rubric page located in ECPI Resources.
Discussion Topic
For this discussion, please complete the following tasks:
1. Select a publicly-traded company.
2. Go to finance.yahoo.com (https://finance.yahoo.com/). Enter the company’s stock symbol in the “Get Quotes” box. If you do not know the stock symbol, you can enter the company’s name in the search tool.
3. Search for the company’s Beta on the Summary page. Make a note of this number.
4. Go to the Historical data page and note the last closing price. Then scroll all the way to the very bottom and note the closing price for 1 year ago. Using these two numbers, calculate the 1-yr actual return for the stock. Use this formula: (yesterday’s price – last year’s price)/last year’s price. For example: (62.15 – 59.05)/59.05 = 5.24%
5. Next, click on Markets at the top of the page. Click on S&P500. Then navigate to the Historical data page and retrieve the last close price and the close 1-yr ago. Compute the actual change for the market using the same formula as above.
6. Next, go to Treasury.gov (https://home.treasury.gov/). and search for information on US Treasury Bills. There should be 3-month, 6-month, 2-year, etc. These are found toward the bottom of the home page in an area called Data Center. Select the 6-month rate, and make a note of this number.
7. Using the information above (the stock’s Beta, the rate on the 6-month Treasury, and the 52-week return for the S&P 500) compute the required rate of return for your stock. In other words, plug these numbers into the CAPM model.
8. Use the CAPM to determine the expected return of this additional stock.
9. Click to download the discussion table (attached, Risk and Returns). Compute the weighted average risk and return for your portfolio.
10. Save your completed table.
In your original post, answer the following:
First, copy and paste your tables.
Compare the expected returns that you computed for each security with the published 52-week change. What do you notice? Are these stocks performing as well as expected?
How do these returns compare with the market return of the last year?
How did the overall risk and return change when you added the stocks together in a portfolio?
What was the outcome of the risk tolerance questionnaire? Were you an aggressive, moderate, or risk-averse investor? Did the portfolio you created match your risk tolerance? If so, how? If not, what would you do to make the portfolio a better match?
Please use the above questions as headers and answer below, after following the prior instructions. Please respond with at least two paragraphs, changing from a matter-of-fact voice. Additional resources included the attached Risk and Return Table or as links to copy and paste from the text by what to do.
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