Concerns the calculation of stock values using the capital asset pricing model (CAPM). Explain the CAPM model. The textbook provides a list of betas for a selection of stocks. Choose two firms from that list and discuss whether the betas are what you would expect. Be sure to explain why or why not. Calculate the returns based on the CAPM model. Be sure to state your assumptions
Classmate Post to respond to:
Thomas Boers: The capital asset pricing model (CAPM) is yet another tool for investors to use when making investment decisions. Our lesson this week describes the model to be a method of attaching a rating of sorts to fluctuations in stock prices and how individual stocks are affected by the fluctuation and the level of risk. To help better explain this tool, Investopedia describes it a little further by adding that no matter how much you diversify, you will always have some level of risk. Investopedia further defines 2 types of risk - systemic and unsystemic. Systemic risk is risk associated to outside factors such as interest rates, recessions and wars. Unsystemic risk is risk associated to any given stock that is not necessarily related to market moves. The CAPM model combines many of the items we have studied up to this point and wraps it up with a bow into a nice formula: Ra=Rrf+βa∗(Rm−Rrf). Where Ra is the expected return, Rrf is the risk-free rate, Rm is the expected market return. The Beta term (βa) in the equation is the relevant measure of the stocks risk and measures its relative volatility. Higher βa generally indicates higher risk.
When you look at Duke Energy βa, I would expect it to be lower than average because incumbent host utilities are generally very stable and there is virtually no outside competition. Tech stocks such as Apple on the other hand I would expect a higher βa because of massive competition in their respective market. βa used in the equations are from our text, Rf and Rm are from respective published figures.
Using the formula for Duke Energy yields a return (Ra) of 4.3% assuming Rf=2.5%, Rm=5.5% and βa=.6.
Using the formula for Apple yields a return of 11.3% assuming Rf=1.04%, Rm=11.84% and βa=.95.
https://www.investopedia.com/articles/06/capm.asp
HRM591
Discussion Post to respond to:
Reading 9.2 speaks to early challenges faced by MBA graduates in their leadership journey. Speak to these challenges. Have you faced any of them? If so, which ones? How have you dealt with (or would deal with) such challenges?
Classmate Post to respond to:
James Parsons: Reading 9.2 was an extremely valuable article that provided wisdom on early career challenges faced by MBA graduates. I am looking to graduate within the next year and the information and experiences shared by the 55 young leaders who were interviewed, provided insight into what to prepare for and what to expect as I may face similar situations. I can speak on similar tendencies and challenges that I have experienced in my various jobs that I have had thus far.
As I continued to read through the article, I could not help but think of my experience as a football coach and the similar challenges that I faced. The challenged did not arise from lack of knowledge. I had been playing football my entire life and finished my career after playing 5 years at a Division II level. The challenge came from my transition from player to coach. This was a completely new scene for me where I was required to transition from learning, applying, and working on myself to teaching, shepherding, and guiding a group of young men who all came from different backgrounds and had different motivations or lack thereof. I had no previous experience in coaching therefore I had no foundation to fall back on. I was required to work through the challenges in order to figure out my new role while also cultivating new skills and attitudes.
I am pretty sure that I could resonate with each of the four common leadership challenges provided in article 9.2 in one way or another. I think the one that I struggled most with was managing and motivating subordinates. The reason is because I see myself as extremely hard working and have little trouble motivating myself to put 100% effort into delivering the highest results on a task. This becomes extremely difficult when you are no longer in full control and have to align and motivate a group of different individuals to match a similar effort level.
This required me to rethink the way I approached my job. I needed to step into their shoes in order to gain perspective on what motivated them and drove them to be successful. This required me to step out of my comfort zone and be vulnerable, empathetic, and approachable in order to foster trust and gain insight.
There were numerous other situations and challenges that were applicable to my life experiences that arose from reading this article. I will definitely keep it as a resource as I prepare for my post MBA graduate life. I agree with the authors that successful performance in most domains can be attributed to experience, practice, and coaching rather than innate talent (Gladwell, 2008). I realized that what I need most is experience in the business world, but this MBA program has provided educational training that replicates developmentally challenging experiences that are helping to sharpen my leadership skills by forcing me to think critically about different situations. I am learning to look deeper at underlying causes and consequences of problems and also working on coming up with new ways of dealing with others.
References
Benjamin B., & O'Reilly, C. (2011). Becoming a Leader: Early Career Challenges Faced by MBA Graduates. Academy of Management Learning & Education, 10(3), 452–472. https://doi-org.devry.idm.oclc.org/10.5465/amle.2011.0002
Gladwell, M. (2008). Outliers: The story of success. New York: Little, Brown.
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