Discuss Apple's (AAPL) and Microsoft (MSFT) beta and relate to the volatility of the stock and...

Discuss Apple's (AAPL) and Microsoft (MSFT) beta and relate to the volatility of the stock and its returns over a six month period.

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Expert Solution

Beta of a stock is representation of sensitivity in relation to the market.

Beta of APPLE is 1.31 when we are considering the recent 5 your monthly beta which will be the historical risk adjusted beta

Beta of Microsoft is .89 when we are considering the recent five year monthly beta and it will be reflecting the historical risk-adjusted beta

Beta of both the stock are representing that the movement and volatility of Apple is higher than that of Microsoft because the beta of Apple is higher and it is more than 1, so it is representing that it is a a more sensitive stock than that of market Whereas beta of Microsoft is lower than 1, which is representing that the volatility of Microsoft is lower than market and hence it can be said that the risk associated with investment in Apple is higher than that of Microsoft because it is having a higher volatility and sometimes beta is also representative of the systematic risk so market risk of Apple is higher than that of Microsoft

The return of Apple in past six months had been monstrous and it has been around80% whereas the rate of return of Microsoft in past 6 months has been around 40% so there has been a stark contrast in the performance of both the stocks as we can say that Apple performance is higher and the volatility related to Apple is also higher wheres volatility and rate of return or Microsoft are lower so it is a defensive stock than Apple.

jeff jeffy answered 1 year ago

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