A. Identify the Beta for for Ford Motor and Apple Stocks. In your own words, wha

Question

A. Identify the Beta for for Ford Motor and Apple Stocks. 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.

https://media.ford.com/content/fordmedia/fna/us/en/news/2015/01/29/4qfinancials.html

https://www.marketwatch.com/investing/stock/aapl/financials

Explanation / Answer

(a) Ford Motors Beta = 0.85 and Apple Beta = 1.11 ("data sourced from Yahoo Finance")

From historical data of each company's beta it can be safely concluded that while Ford's beta has decreased over a period of time from 1.008 in 2016 to 1.003 in 2017 to 0.85 now, Apple's beta has decreased from 1.12 in 2012 to 1.11 now, thereby implying only a minor risk reduction in the latter's stock price. Beta is a measure of the systematic risk of a firm which, in turn, is made up of the firm's business risk and financial risk relative to a benchmark which is usually the benchmark stock exchange.

Hence, if the stock market(benchmark index) rises by 10 %, the Ford Motor stock is expected to rise by 8.5 % (0.85 x 10) and Apple stock is expected to rise by (1.1 x 10) = 11 %, thereby indicating the latter's greater volatility with respect to the broader market (benchmark stock index).

NOTE: Please raise a separate query for the solution to the remaining unrelated question.

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