Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Determinants of Required Rate of Return
1.Risk free rate - This is the interest rate such would exist on default free securities like Treasury bills and bonds.
Risk free rate is made up of two components like:
Therefore risk free rate (RF) = Real rate of return + Inflation premium.
If risk premium is added to risk free rate, necessary rate of return is derived. Hence required rate of return = real rate + inflation + premium + risk premium = Risk free rate + Risk premium.
2. Inflation premium - Investors are compensated for reduction in purchasing power of money. From point (1) the higher such the inflation premium, the higher the market interest rate.
3. Default risk premium (DRP) - This is the rate further added to risk free rate for possibility of default in such payment of loans. Generally, it's added if two securities have equal marketability and maturity.
4. Liquidity premium - This is premium that is added to equilibrium interest rate on a security if such type of security cannot be transformed to cash on short notice and close to the original cost.
5. Maturity Risk Premium - a premium reflecting interest rate risk that is risk of capital losses that investors are exposed to due to hanging interest rate over time.
Growth Rates Most Recent Fiscal Year Fiscal Year (-1) Fiscal Year (-2) Fiscal Year (-3) Annu
Importance of Interest Rates These are of a specifically relevance to a finance manager since: i) They measure the cost of borrowing. ii) Interest rates in a country influen
What is the Objectives of Listing Objectives of listing are mainly to: (i) Provide liquidity to securities. (ii) Mobilize savings for economic growth. (iii) Protect
Advantages of Residual Theory 1. Saving on floatation costs No require to raise debt or equity capital as there is high retention of earnings that necessitates no floatat
LOMBARD COMPANY
Explain about the monetary role of banks. The Monetary Role of Banks: • A bank is a financial intermediary. • Bank reserves are the currency banks hold within their va
Allocation of financial resources to the different department can be done based on the past experience of the expenses and other available relevant information. Looking at the requ
Assignment: Mr. Ali wants to start “Rent-A-Car” business. He wants to start this business with at least 20 cars. He estimates that the required investment for the business is Rs.
Financial Instruments in Money Market or Discount Markets Financial Instruments in Money market involve as: 1. Commercial paper 2. Bills of exchange 3. Treasury bills
Reasons for Different Interest Rate Interest rates may differ in different market and market segment since: i) Size of the loan: Deposits above specific amounts into the
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +91-977-207-8620
Phone: +91-977-207-8620
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd