Time Warner Beta Essay Example for Free

prison term Warner important EssayIntroduction Definition of important important, which is represented by the Greek symbol, is also denoted as the Beta Coefficient and is identified as the slope of the one-dimensional regression of the portfolio in which within a specific time period or point served as benchmark. (Risk Management,) Beta is the assessment of the market adventure or volatility of the stock. With this, it may help investors to make the right decisions when spend stocks because of some fluctuations in price of the stocks. (Beta Gauging Price Fluctuations, July 29, 2005)Volatility which is the measure of the uncertainty or risks accompanied in investing due to fluctuation of the prices is determined its relativity by approximating its Beta. Volatility is associated with gages repute which means that when the investment is said to having a higher volatility, there is a bigger potential of gages value for expansion over a larger range. Thus implying that wi thin a shorter period of time, price of the security can vary significantly. On the contrary, a lower volatility insinuates that the fluctuation in securitys value is unnoticeable however there are small alterations of the value within a stable range of time. (Volatility,)With that, Beta being the measurement of volatility, it offers meaningful significance to the market risk compared to the greater market. Furtherto a greater extent, Beta is used for comparison along with the other stock, estimating the overall volatility of the return of the security in contradiction of the return in the market.Computation of Beta In investment and finance, Beta is the connective or the coefficient of a portfolio or an individual stock in contrast to the market all together. So as to compute for the beta, the regression analysis is used. The Beta of an asset is calculated using the formulawhere in,ra is the gauge of yield profit of the asset andrp is the evaluation of the calculate of the yield profit of the portfolio of which the asset is a component. (Beta Coefficient,)Furthermore, the cost equity of a company can be projected using the Capital plus Pricing Model in which the transaction of equity beta of the company and again, equity beta is the operation of both the weight and asset risk. This is calculated using the formulawhere in,KE is the cost of equity of the company,RF is the rate of return on a risk free investment also known as the unhazardous rate,RM is the market portfolio return, andE is the equity beta which is computedwhich is derived from this formula ,and the formula of a whole Value (V) Firm Value (V) = Debt Value (D) + Equity Value (E)(Beta Coefficient,) Applying this entire concept in chosen business which is the measure Warner, the worlds largest media company, had beta of greater than 1 which indicates that the price of security will be more volatile than the market. This means that the investors accept the additional risk accompanied to attain the possibility of more rewards. The cartridge holder Warner had a fixed exchange rate during their merger with the AOL. The conditions contain include the 1.5 shares of AOL Time Warner would be apt(p) to the Time Warner for each share their stock and America Online shareholders will get one share of AOL Time Warner stock for every share of stocks that the America Online owns.(Dignan, 10 Jan 2000 ) Using the Charts in Beta, investors could observe the fluctuations and changes in the charts, its opening, closing prices and the high and low points in a specific period of time (Time Warner Inc.,).ReferencesBeta Coefficient Electronic Version. Retrieved whitethorn 23, 2007 from http//www.answers.com/Beta.Beta Gauging Price Fluctuations Electronic (July 29, 2005). Version. Retrieved May 23, 2007 from http//www.investopedia.com/articles/01/102401.asp.Dignan, L. (10 Jan 2000 ). AOL, Time Warner tout broadband future, synergy Electronic Version. Retrieved May 23, 2007 from http//news.zd net.co.uk/itmanagement/0,1000000308,2076198,00.htm.Risk Management Electronic Version. Retrieved May 22, 2007 from http//www.tradetrek.com/Education/risk_management.asp.Time Warner Inc. Electronic Version. Retrieved May 24, 2007 from http//finance.yahoo.com/chartschart1symbol=twxrange=1dindicator=volumecharttype=linecrosshair=onlogscale=onsource=undefined.Volatility Electronic Version. Retrieved May 23, 2007 from http//www.answers.com/volatility.