Show capital asset pricing model, Electrical Engineering

Assignment Help:

Q. Show Capital asset pricing model?

This model was developed by the William F Sharpe ( 1990 Nobel prize winner in the economy ) and john linter in 1960. The model attempt to capture market behaviors it is simple in the concept and has real world applicability the model is based on the promise that the systematic risk is attached to a security is the same irrespective risk is attached to in the security in a same irrespective in the any number in the security in the portfolio . the total risk of the portfolio is reduced with the increase in the number of the stock as a results of decrease in the unsystemic risk distribution over number of the stocks in the portfolio this is shown in the figure aside.

A risk adverse investor prefers to the invert the risk free securities a small investor has having few securities has greater total risk. To reduce the risk he must up build up well diversified securities in the portfolio a diversified and balance portfolio of risk, a diversified and balanced portfolio no all securities will bring an investor systematic risk to the leave to the average systemic risk in the stock market as whole. The CAPM is an alternative approach to the problem of measuring the cost of capital. The models attempt to the measure that the return to an investor is made up to the two parts a risk free rate of the interest to which is added a premium for risk is greater. The theory predicts that the expected risk premium for the an individual stock will be proportion to its beta such that

Expected risk premium on a stock = beta expected risk premium in the market


Related Discussions:- Show capital asset pricing model

Explain state-variable techniques, Q. Explain state-variable techniques? ...

Q. Explain state-variable techniques? The matrix formulations associated with state-variable techniques have largely replaced the block-diagram formulations. Computer software

Frequency response of amplifiers, Q. Frequency response of amplifiers? ...

Q. Frequency response of amplifiers? All amplifiers exhibit variations of performance as the signal frequency is changed. The frequency response of an amplifier may be defined

Explain the synchronous machines, Explain the Synchronous Machines? A s...

Explain the Synchronous Machines? A synchronous machine, unlike an induction (or asynchronous) machine, only develops torque at a fixed, so called, synchronous speed - n s whi

Energy gap, Energy Gap Differentiating feature between the metals, ...

Energy Gap Differentiating feature between the metals, insulators, and semiconductors. Ascertains the absorption or emission spectra, the leakage current, and the intrin

Applications of thermodynamics, what are the applications of thermodynamics...

what are the applications of thermodynamics in Electrical Engineering?

moving average model, Altavox is a manufacturer and distributor of a lot o...

Altavox is a manufacturer and distributor of a lot of electronic instruments and devices, including digital/analog multimeters, function generators, oscilloscopes, frequency counte

Draw a block diagramfor a 2-to-4 decoder, Q. Draw a block diagramfor a 2-to...

Q. Draw a block diagramfor a 2-to-4 decoder. Obtain the truth table, and develop a logic diagram.

Drawing, #question what are the types of lines used there and their applica...

#question what are the types of lines used there and their application ..

What is message demodulation, Q. What is Message Demodulation? The majo...

Q. What is Message Demodulation? The major advantage of the conventional (standard) DSB AMsignal transmission is the ease with which the signal can be demodulated. Themessage s

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