Discuss risk from perspective of capital asset pricing model, Financial Management

Assignment Help:

Discuss risk from the perspective of the Capital Asset Pricing Model (CAPM).

The Capital Asset Pricing Model or CAPM be able to be used to compute the appropriate required rate of return for an investment project given its degree of risk as measured by beta (b).  A project's beta represents its extent of risk relative to the overall stock market.  In the Capital Asset Pricing Model or CAPM when the beta term is multiplied by the market risk premium term the result is the additional return over the risk-free rate that investors demand from that individual project.  High-risk (high-beta) projects have high necessary rates of return, and low-risk (low-beta) projects have low necessary rates of return.

 


Related Discussions:- Discuss risk from perspective of capital asset pricing model

Major risk return decision areas, Q. Major Risk Return Decision Areas? ...

Q. Major Risk Return Decision Areas? 1) Financial Analysis and Control: This area is concerned with the Financial Statements, i.e. Income Statement, Balance Sheet, Funds Flow S

Describes net operating income approach to capital structure, Q. Describes ...

Q. Describes Net Operating Income Approach to Capital Structure? NOI (Net Operating Income Approach):- This is another speculation of capital structure which is propounded by '

Calculate the compound return, a)  What two legal documents should the coup...

a)  What two legal documents should the couple ensure are up-to-date if they want a sound estate plan?  What would happen if either became incapacitated or died and didn't have any

Explain about working capital funding policy, When considering how working ...

When considering how working capital is funding it is useful to divide assets into permanent current assets, noncurrent assets and fluctuating current assets. Permanent current ass

Calculate betas against local indexes, Does is make any sense to calculate ...

Does is make any sense to calculate betas against local indexes when a company has a great part of its operations outside this local market? Both the betas calculated against l

Yield curve risk, The graphical representation of the relationship between ...

The graphical representation of the relationship between yield and maturity is known as yield curve. Yield curve risk is the risk of experiencing an adverse

Working capital financing, Do you guys provide Working Capital Financing as...

Do you guys provide Working Capital Financing assignment help? I need writing a report on Working Capital Financing and it is about 2000 words. Let me know. I need to buy your solu

No external financing for new proposals, No External Financing for New Prop...

No External Financing for New Proposals: If a firm have sufficient retained earnings with it as required by the new proposal, then the firm may not raise any external finance. In

Resource acquisition and resource planning, 1. List five different types of...

1. List five different types of resource that a company might consider hiring or leasing. Explain why the might choose these option instead of outright purchase 2. List three di

Multicollinearity, Multicollinearity As the degree of correlation betwe...

Multicollinearity As the degree of correlation between the independent variables increases, the regression coefficients become less reliable. That is, although the independent

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

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!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd