I need assistance with research on a 10k report for a particular company. The research is based on market risk, Beta, the security market line, and CAPM. I also need two responses for peers on the same topic ( based on their post).
This week we are reviewing market risk, Beta, the security market line, and CAPM. For your chosen company, research the following:
1. In the 10-K there is a section 7A which discusses both systemic and unsystemic risk. Discuss 2-3 unsystemic risks that are “unique” (unsystemic) to your company. Do you not include systemic risks that apply to all companies in the industry.
2. What is the asset Beta of your company?
3. Calculate the Security Market Line for your company using a risk free rate of 2%. What is the risk premium of your company?
Example of others posts:
1) Write peer response
2)write peer response
Example of responses to post:
1)RE: Discussion Week 5 – Walt Disney Company
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Before COViD struck, I tried to hit as many Disneylands overseas as possible. I went to Hong Kong Disney (it was s blast), and Disneyland Paris was the next stop. But that was at the end of 2019, and COVID was becoming a thing. So that disrupted the adventure.
Hong Kong uses the Hong Kong Dollar. Credit cards are widely accepted at Disney, except at small stands. So yeah, I can understand the riskiness of the currency.
Based on what we read, it’s true that a beta higher than one indicates that Disney’s implied volatility exposes the market’s sentiment of Walt Disney stock’s possible movements over time. However, Macroaxis states that it does not forecast the overall direction of its price.
I think it is interesting because it can affect demand–like a change in income, population, tastes, or expectations about the future. Or because of the supply chain effects –like a change in natural conditions, input prices, technology, or government policies.
If Disney’s implied volatility is high, the market may believe the stock has the potential for high price swings in either direction.
Great post! I love Disney, so getting the opportunity to read about what’s going on gives me an area to pinpoint my little research on Disney.
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2) RE: Discussion Week 5 – Walt Disney Company
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Great post Jane,,
You bring up a great unsystematic risk regarding the foreign exchange currencies. Does Disney have a set rate for their tickets and their merchandise, and is it the same at all Disney parks? Exchange rates are changing daily so they likely are not reflecting the same price that you may pay in Orlando for example. It would be interesting to see which Disney park is the most expensive and how much tourist traffic goes through compared to other parks. The Disney parks seem to all be located in developed nations where the economies are “stable.” This could benefit Disney and lower the risk that a country may pull out of the contract. However, this can all change if a country’s economy collapses or if they go to war for example; so it is a risk that Disney is undertaking. If Disney wanted to expand into another nation they may decide to go for a market that is economically stable to keep their risk lowered. I vote Canada
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3) RE: Discussion Week 5 – Walt Disney Company
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Just as I told Joe, I think that the foreign exchange risk is simply added to all companies 10K by default. However, I am curious as to how this risk pertains to Disney? I always assumed that most of Disney’s revenue is generated in the U.S. and thus they have minimal foreign currency exchange risk.
Also, their beta signals to me that their stock is quite volatile. Would you still recommend purchasing their stock even during these times of economic hardship?
Did you calculate the expected returns for Disney with the SML? Their risk premium seems somewhat low given their high beta.
JohnBottom of Form
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