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.
In mergers, acquisitions, or other relationships between hospitals and physician groups, what are the benefits to each party from entering into an arrangement with the other? What
challenges your likely to face when apparising a project on the implemtation stage
Stone Container is a major producer of cardboard boxes. Stone Container has $10M in outstanding equity. In addition, it has $2M in outstanding debt. The debt is a ten-yearmortgage
Question 1 a) What are the main characteristics of an Efficient Tax system? b) What are the instruments of Public Finance and explain their efficiency. c) Explain what
Functions of Central Depository System or CDS 1. Immobilization of securities that is removal of physical movement of securities. 2. Dematerialization that is removal of ph
1) What happens to the portfolio standard deviations as the investor substitutes the foreign securities for the U.S securities? What combination of U.S and Japanese stock minimizes
The table below gives data on the average number of football games attended per year among a population of students at a small college, separately by major. All students are in one
Imagine Joy is the manager of a bank named Money Talks Bank of Virginia . This bank has recently issued new loans to customers. Joy wants you, the business analyst to prepare a re
Based on the example in Lesson 2, compute your quarterly interest for three years if you deposit $500 at 8 percent, compounded quarterly. Remember to divide the 8 percent by 4 to g
A firm's current ratio is 1.5, and its quick ratio is 1.0. If its current liabilities are $10,000, what are its inventories? a Current Ratio
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