Roth- Case Paper
FINANCE 301
DR. SHELDON NOVACK
CASE STUDY
ROTH FINANCIAL ADVISORS PART #1 INTRODUCTION Roth Financial, founded nearly 10 years ago, is a financial services firm which has a diverse base of clients. The founder of this start-up firm, Hugo Roth, developed a reputation for himself and also his associates by the way the financial firm conducts business. As the firm grew, so did the firm’s reputation for honesty and fair dealing. Hugo Roth established a reputation for training and helping his new associates establish themselves in the financial industry. Steve Johnson was a financial advisor in training for Roth Financial Advisors and was willing to take extra measures in order to learn more about financial services. His most recent task was to develop a presentation in regards to the different types of risks investors may come across when investing their money with Roth Financial. Steve’s task was to break down different types of risk into its simplest components and to figure out a way to show clients how risk was treated in financial markets and when making investments decisions. Hugo Roth has provided several sets of numbers for Steve to use in his presentation. The first set of numbers was a group of returns from different stocks which was classified by the type of economy. This could give a direction of what these stocks might face in the future and the return each was likely to experience in different situations. PART #2 METHODOLOGIES 1) Beta= [ Cov(r, Km) ] / [ StdDev(Km) ]2
R= is the return rate of the investment
Km = is the return rate of the asset class
2) CAPM= ra = rf + Betaa(rm - rf)
Ra= is the asset price
Rf = is the risk-free rate of return
Beta= is the risk premium
Rm =is the market rate of return 3) Rate of Return 4) 5)
PART #3 SOLUTIONS 1) Beta of Stock A= 1.315
Beta of Stock B= -.557 2) l
3) Rate of Return= 3.0% 4) Standard deviation= 5) L
PART #4 CONCLUSIONS
DR. SHELDON NOVACK
CASE STUDY
ROTH FINANCIAL ADVISORS PART #1 INTRODUCTION Roth Financial, founded nearly 10 years ago, is a financial services firm which has a diverse base of clients. The founder of this start-up firm, Hugo Roth, developed a reputation for himself and also his associates by the way the financial firm conducts business. As the firm grew, so did the firm’s reputation for honesty and fair dealing. Hugo Roth established a reputation for training and helping his new associates establish themselves in the financial industry. Steve Johnson was a financial advisor in training for Roth Financial Advisors and was willing to take extra measures in order to learn more about financial services. His most recent task was to develop a presentation in regards to the different types of risks investors may come across when investing their money with Roth Financial. Steve’s task was to break down different types of risk into its simplest components and to figure out a way to show clients how risk was treated in financial markets and when making investments decisions. Hugo Roth has provided several sets of numbers for Steve to use in his presentation. The first set of numbers was a group of returns from different stocks which was classified by the type of economy. This could give a direction of what these stocks might face in the future and the return each was likely to experience in different situations. PART #2 METHODOLOGIES 1) Beta= [ Cov(r, Km) ] / [ StdDev(Km) ]2
R= is the return rate of the investment
Km = is the return rate of the asset class
2) CAPM= ra = rf + Betaa(rm - rf)
Ra= is the asset price
Rf = is the risk-free rate of return
Beta= is the risk premium
Rm =is the market rate of return 3) Rate of Return 4) 5)
PART #3 SOLUTIONS 1) Beta of Stock A= 1.315
Beta of Stock B= -.557 2) l
3) Rate of Return= 3.0% 4) Standard deviation= 5) L
PART #4 CONCLUSIONS