Purchase Solution

Would you invest in a company with Beta coefficient below 1?

Not what you're looking for?

Ask Custom Question

Would you invest in a company with Beta coefficient below 1? What do you think about volatility of current market? What about low interest rates implemented by Federal Government?

Purchase this Solution
Solution Summary

This solution is 212 words and discusses the pros and cons of beta and low interest rates.

Solution Preview

Yes, I would invest in a stock with a beta below 1, especially if I believe the market will be flat or downward trending as it would protect capital the best (goes down the least when market falls).

The current market is very volatile and so low beta stocks are attractive from that aspect. However, volatile markets are not just going down, they are also going up! That means only having low beta stocks means you may miss considerable upside as well.

The low interest rates mean that stocks can be an attractive alternative to ...

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
Recent Feedback
  • "hey just wanted to know if you used 0% for the risk free rate and if you didn't if you could adjust it please and thank you "
  • "Thank, this is more clear to me now."
  • "Awesome job! "
  • "ty"
  • "Great Analysis, thank you so much"
Purchase this Solution
Free BrainMass Quizzes
Understanding Management

This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.

Social Media: Pinterest

This quiz introduces basic concepts of Pinterest social media

Understanding the Accounting Equation

These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.

Organizational Leadership Quiz

This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.

Marketing Research and Forecasting

The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.

View More Free Quizzes
Related BrainMass Solutions

  • The Importance of Beta

    The average risky asset refers to the market beta, and market beta always equals one (bM = 1). A stock with a lower risk has a beta below 1, and a stock with a higher risk has a beta of over 1.

  • The Capital Asset Pricing Model: Merck & Co.

    If you invest 1/3 of your money in each of these companies' stocks, what would the beta of the portfolio be? What would be the expected rate of return? Capital Asset Pricing Model: Merck & Co. According to Yahoo!

  • Capital Asset Pricing Model

    Finance find the value of beta for your reference company (Apple, INC.) a. What is the estimated beta coefficient of your company? What does this beta mean in terms of your choice to include this company in your overall portfolio? b.

  • Finance: Portfolio analysis.

    the expected return, standard deviation (σ), and the coefficient of variation (CV) for each stock and, based on the CV, which stock should you invest in?

  • Finance and Market Risk questions (random stocks, low beta stocks, publicly traded stocks and diversified portfolios)

    If you formed a portfolio which included a large number of low beta stocks (less than 1.0 but greater than -1.0), the portfolio would itself have a beta coefficient that is = to the weighted average beta of the stocks in the portfolio, so the portfolio

  • Estimated beta coefficient of Raytheon

    An asset with a beta of 0 means that its price is not at all correlated with the market; that asset is independent. A positive beta means that the asset generally follows the market.

  • Calculating expected return, standard deviation and CV

    Based on the CV, which stock should you invest in? Briefly explain. 2.

  • Determining Risk of Stocks

    She wants to invest $40,000 in a stock with a beta of 2.0. After adding the new stock to her existing portfolio, what will the portfolio beta be? Stock Weight Beta Old stock 0.8 1 New Stock 0.2 2 Portfolio beta 1.20 5.

  • Kish Hedge fund

    327908 Security Market Line Problem: Security Market Line You plan to invest in Kish Hedge fund, which has total capital of $500 million invested in 5 stocks: Sock Investment Stock's Beta coefficient A $160 million

View More Related Solutions