What is risk adjusted discount rate, Financial Management

Assignment Help:

Q. What is risk adjusted discount rate?

The risk adjusted discount rate includes two rates viz

(i) Risk-free rate: - Risk free rate is the usual rate or the usual discount rate that takes care of time element and

(ii) Risk Premium Rate: - Risk Premium Rate is the excess rate or extra rate that takes care of the risk factor.

Therefore the risk adjusted discount rate is the usual or normal discount rate for the time factor plus the extra or additional discount rate.


Related Discussions:- What is risk adjusted discount rate

ACCRUAL INCOME VERSU CASH FLOW, Thomas book sales, inc. supplies texbooks t...

Thomas book sales, inc. supplies texbooks to college and university bookstore. The books are shipped with a proviso that they must be paid for within 30 days but can be returned f

Significant performance indicators, Significant Performance Indicators ...

Significant Performance Indicators   Following are the most commonly used performance indicators used to assess the financial, and general health of any company:   Gro

Conversion privilege, In convertible bonds, bondholders get a right t...

In convertible bonds, bondholders get a right to convert their bonds for a specific number of shares of the bond issuer. This privilege allows bondholders to take

Estimate the most systematic risk, Yang Su is considering the following inf...

Yang Su is considering the following information on two stocks:                                                                              Rate of Return State of Economy

Example of relationship between bond price and time, Illustration    ...

Illustration      Discount bond (5 yr. bond with 10% coupon) (expected rate yield at 12%) Premium bo

Calculate the revenue - operating cost, Chrysler decides to avoid the probl...

Chrysler decides to avoid the problems associated with exporting autos to Japan by building a plant in Japan. The cost is expected to be $1 billion with $500 million to be spent no

Evaluate return on capital employed, a) Gross profit = $500,000 and Expense...

a) Gross profit = $500,000 and Expenses = $100,000 for Year 2. b) Year 2 GPM = $500k / $1,000k = 50.0% Year 1 GPM = $400k / $850k = 47.05% Year 2 NPM = $400k / $1,000k =

What is the usual pattern of cash flows, What is the usual pattern of cash ...

What is the usual pattern of cash flows for a share of preferred stock? How does the market determine the value of a share of preferred stock, given these promised cash flows?

Federal reserve system forecast, A. Joe wants to invest in Nebraska Municip...

A. Joe wants to invest in Nebraska Municipal 6% GOB that are rated AA. Joe's tax rate is usually between 28% .  GE plans to sell AA rated 8% coupon bonds. Compute Joe's after-tax i

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