Present Value and the Risk Return Trade Off

Module 1 – SLP

Present Value and the Risk/Return Trade-Off

For the SLP this session, you will be taking a close look at a
company of your choice. You are free to choose any company you want as
long as it is publicly traded on one of the major stock market exchanges
such as NYSE or NASDAQ. This could be a company that you personally are
interested in investing in, or a company whose product you buy, or one
that you?ve read about in the news recently and would like to know more
about. Do some research on this company, including recent articles.
Also, look up the company on Google Finance. This will give you a wealth
of information including stock prices over the last month, year, five
years, etc., along with other information such as the beta or whether or
not the company is profitable.

Once you have chosen a company and have done some initial research on
it, write a 2- to 3-page paper discussing the following items:

  1. Give a brief description of the company and why you find it interesting.
  2. What is the beta of this company?s stock? Based on the magnitude of
    the beta, do you think it is low risk, high risk, or somewhere in
    between?
  3. Now look at recent stock price movements. What is the highest price
    the stock has been over the last year? The lowest price over the last
    year? Look at the five-year pattern as well. Based on what you see, what
    does this tell you about the riskiness of the stock?
  4. Look at some other companies in the same industry as your chosen
    company. How do they compare in terms of beta and other measures of
    riskiness? Would you prefer to invest in your chosen company, or do some
    of its competitors seem like a better bet?

SLP Assignment Expectations

  • Answer the assignment questions directly.
  • Stay focused on the precise assignment questions. Do not go off on
    tangents or devote a lot of space to summarizing general background
    materials.
  • For computational problems, make sure to show your work and explain your steps.
  • For short answer/short essay questions, make sure to reference your
    sources of information with both a bibliography and in-text citations.
    See the Student Guide to Writing a High-Quality Academic Paper,
    including pages 11-14 on in-text citations. Another resource is the
    ?Writing Style Guide,? which is found under ?My Resources? in the TLC
    Portal.

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