What are the two basic factors that determine the price of an investment O a. Expected returns and risk O b. Size and risk c. Expected returns and liquidity
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- 13. Both real and financial assets have four principal attributes that are significant factors in the investment decision process. These are: I. liquidity II. capital gain III. risk IV. return or yield V. time pattern of future cash flows VI. price and cash flow volatility A. I, III, IV, V B. I, II, III, IV C. I, III, IV, VI D. II, III, IV, VWhat does standard deviation measure? A. The holding period B. The gain on the investment C. Risk D. The amount of dividend #####################Question 4 a) Explain the relationship between risk and return on Investment b) Describe the Markowitz portfolio selection model/theory and state its assumptions c) Describe the CAPITAL ASSET PRICING MODEL and state its Assumptions d) Explain the Portfolio Investment Process
- Question 1 Compare and contrast the Markowitz Portfolio Theory (MPT) with the Capital Asset Pricing Model (CAPM) with reference to the following aspects:Risk measurement;Risk-return graphical presentation Capital Market Line (CML) versus Security Market Line(SML);Usage in portfolio management.vuunyiuunu assumption of "y. Q2. How portfolio return and risk is calculated? Explain the role of correlation among asset in portfolio? Why this correlation is important?Define (a) return on investment, (b) risk, (c) financial flexibility, (d) liquidity, and (e) operating capability.
- Can someone give an example or scenario about the following: 1. Capital Asset Pricing Model2. Market Risk premium3. Risk free rate4. Security market line5. Systematic riskQUESTION 11 Which of the following factors comprise the CAPM? I. dividend yield II. risk-free rate of return III. the expected rate of return on the market IV. risk premium for the firm I and III only II and IV only III and IV only II, III and IV onlyWhich of the following is needed to calculate a firm’s WACC? A. the cost of carrying inventory B. the amount of capital necessary to make the investment C. the cost of preferred stock D. the probability distribution of expected returns E. both b and c
- 4.32 Investment risk analysis. The risk of a portfolio of financial assets is sometimes called investment risk. In general, in- vestment risk is typically measured by computing the vari- ance or standard deviation of the probability distribution that describes the decision maker's potential outcomes (gains or losses). The greater the variation in potential outcomes, the greater the uncertainty faced by the decision maker; the smaller the variation in potential outcomes, the more predictable the decision maker's gains or losses. The two discrete probability distributions given in the next table were developed from historical data. They describe the potential total physical damage losses next year to the fleets of delivery trucks of two different firms. Loss Next Year SO 500 NW 1,000 1,500 2,000 2.500 Firm A 3.000 3,500 4,000 4,500 5,000 Firm B Probability Loss Next Year 01 SO 0 .01 200 .01 700 1,200 1,700 2,200 2,700 3.200 3.700 4,200 4,700 30 .01 01 Probability 85984579985 .30 a.…D3 Explain the concept of the efficient frontier. In addition, outline the relationship between the capital allocation line (CAL) and the efficient frontier, and explain the uses of the CAL in portfolio management.?What does the capital asset pricing model (CAPM) calculate? a. The expected rate of return on an individual stock with respect to the risk-free rate of return b. The expected rate of return of an individual stock based on its overall risk c. The expected rate of return of an individual stock with respect to its market risk only d. The expected rate of return of an individual stock reflecting its financial risk Clear my choice