Describe both the capm and the apt

Assignment Help Financial Management

Reference no: EM131898690

You are an investment officer at Pegasus Securities and are preparing for the next meeting of the investment committee. Several committee members are interested in reviewing two asset pricing models – the capital pricing model (CAPM) and the arbitrage pricing theory (APT)- and their use in portfolio management and stock selection.

a. Describe both the CAPM and the APT, and identify the factors(s) that determines returns in each.

b. “The APT model is more general than the CAPM”. Explain how this observation has meaning in the stock selection process.

Reference no: EM131898690

Questions Cloud

Address related to future growth of your company : what concerns should you address related to future growth of your company if you pay out dividends to stockholders?

What is value of one-month call option with exercise price : What is the value of a one-month call option with an exercise price of $40? What is the option delta of the two-month call over the first one-month period?

Conversion of cash flow to its present value : The following equation describes the conversion of a cash flow to its present value (in time zero).

Which is greater-lenders yield or effective borrowing cost : Which is greater, lenders’ yield or effective borrowing cost? Why?

Describe both the capm and the apt : Describe both the CAPM and the APT, and identify the factors(s) that determines returns in each.

Broadly diversified portfolio of stocks and bonds : As the manager of a large, broadly diversified portfolio of stocks and bonds,

Estimating profits from currency futures and options : Estimating Profits From Currency Futures and Options. Determine the total dollar amount of your profit or loss from your position in the put option.

What would be total return of bond in dollars : What would be the total return of the bond in dollars?What would be the total return of the bond in percent?

What is portfolio beta : An individual has $15,000 invested in a stock with a beta of 0.8 and another $45,000 invested in a stock with a beta of 2.5. what is her portfolio's beta?

User Account

All Pages