Capital asset pricing model most appropriately

Assignment Help Financial Management
Reference no: EM131552294

Which one of the following explains the concept of CAPM (Capital Asset Pricing Model) most appropriately?

1) It is a method of calculating the expected rate of return on the equity investment made by the stockholders of a company.

2) It is calculated using the rate of return on the safest investment, BETA, and the rate of return beyond the safest investment (which is often referred to as normal risk premium) required by investors.

3) The management of a company can use this to set the target ROA.

4) All of the above

5) 1) & 2) only

Reference no: EM131552294

Questions Cloud

Determine the most reasonable price for this bond : You are thinking of purchasing a bond (face value $10,000). It matures in 3 years from today. Determine the most reasonable price for this bond.
What is the overall interest rate of this company : A company’s current balance sheet shows three different types of long-term debt. What is the overall interest rate of this company?
What is the expected value of the investment : Consider an investor with utility given U = v p where p is net cashflow (“profits”). What is the expected value of the investment?
Find the expected cash flow from each apartment complex : Find the expected cash flow from each apartment complex. What is the coefficient of variation for each apartment complex?
Capital asset pricing model most appropriately : Which one of the following explains the concept of CAPM (Capital Asset Pricing Model) most appropriately?
How much are you willing to pay for the stock today : Given your risk-aversion; how much are you willing to pay for the stock today?
We know beta is a company-specific risk index : We know “BETA” is a company-specific risk index.
Concept of the time value of money : Which one of the following describes the concept of the Time Value of Money (TVM) most appropriately?
Describes it normal market premium or normal risk premium : Which one of the following describes it (Normal Market Premium or Normal Risk Premium) most appropriately?

Reviews

Write a Review

Financial Management Questions & Answers

  Transaction deposits on its balance sheet

Patriotic Bank currently has $800 million in transaction deposits on its balance sheet. The current reserve requirement is 10 percent, but the Federal Reserve is decreasing this requirement to 8 percent. Present the balance sheet (before and after ch..

  Difference is in amortization schedules

Imagine a hypothetical case in which every other term was identical and only difference is in amortization schedules

  What amount will be in your account at the end of six years

You plan to make your first deposit one year from today. What amount will be in your account at the end of 6 years?

  What was the inflation rate of airfare

As reported by the Bureau of Labor Statistics, the CPI for Airfare in 2263 was 583.9 (using a base year of 1914 = 100). The CPI for Airfare in 2264 was 615.8. Based on this data, what was the inflation rate of airfare from 2263 to 2264?

  Respectively the supply and demand for the commodity

The producer of a certain commodity determines that to protect profits, the price p should decrease at a rate equal to half the inventory surplus S−D, where S and D are respectively the supply and demand for the commodity. Suppose the supply and dema..

  Construct a payoff table showing the outcomes of expiration

What type of transaction should you execute to achieve the maximum benefit? Demonstrate that your strategy is correct by constructing a payoff table showing the outcomes of expiration.

  Suppose the international parity conditions hold

Suppose the international parity conditions hold. Does that mean that the nominal interest rates would be equal among countries? Why or why not?

  Use monetary and fiscal policy fixes

Let's say that you're the Fed chairperson and that the country is in a recession. What actions should the Fed take in order to pull the country out of the recession? What would you advise government officials to do to improve the economy? Please use ..

  Investor with a two-year investment horizon

Suppose that an investor with a two-year investment horizon is considering purchasing a seven-year 9% coupon bond selling at par. The investor expects that he can reinvest the coupon payments at an annual interest rate of 10% and that at the end of t..

  The corporation bond rating has increased

A corporation issued a 20 year, 5% coupon bond 8 years ago. Over those 8 years, interest rates generally have fallen, and the corporation's bond rating has increased from BBB to AAA. As a result, the YTM has fallen. Based on these developments...

  What is the projected dividend

Momsen Corp. is experiencing rapid growth. Dividends are expected to grow at 26 percent per year during the next three years, 16 percent over the following year, and then 4 percent per year indefinitely. The required return on this stock is 10 percen..

  Average annual return for this asset over specific period

Assume that the returns from an asset are normally distributed. The average annual return for this asset over a specific period was 13.2 percent and the standard deviation of those returns in this period was 41.1 percent. What is the approximate prob..

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