Risk from the perspective of the CAPM
Discuss risk from the perspective of the CAPM (Capital Asset Pricing Model).
Expert
a) The CAPM (Capital Asset Pricing Model) can be used to compute the correct required return rate for an investment project given its degree of risk similarly as calculated by beta. b) Beta of a project stands for its degree of risk compared to the overall stock market. c) When the beta term is multiplied by the market risk premium term in the CAPM, the consequence of that will be the extra return over the risk-free rate which investors will demand from that individual project. d) High-beta (High-risk) projects have high required return rates and low-beta (low-risk) projects have quite low required return rates.
How was Markowitz show that one would invest in the first stock or may be sold the second stock?
Describe the concept of the world beta of a security.The world beta measures the sensitivity of returns to security to returns to the world market portfolio. This is a measure of the systematic risk of the security in global setting. Statistically, the world beta can be des
How is arbitrage argument estimated?
Explain number of dimensions in Monte Carlo method.
A stock whose value is now $44.75 is growing on average by 15 percent per annum. Its volatility is 22 percent. The interest rate is 4 percent. You need to value a call option along with a strike of $45, expiring in two months’ time. So, what can you do?
How was a Monte Carlo simulation in finance assured?
Criticize the flexible exchange rate regime from the point of view of the proponents of the fixed exchange rate regime. If exchange rates are randomly fluctuating, that may discourage international trade and suppor
Explain in brief about financial ratio?
Describe difference between international financial management and domestic financial management?
Who gave option-pricing ability to the masses?
18,76,764
1930530 Asked
3,689
Active Tutors
1425857
Questions Answered
Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!