Arbitrage opportunity-transaction costs or any frictions

Assignment Help Financial Management
Reference no: EM131973360

Assume that we are living in a perfect capital market, there are no arbitrage opportunity, transaction costs or any other frictions. You are considering investing your money in two stocks. Stock A has no ideosyncratic risk. Stock B has high idiosyncratic risk. Which of the following statement is correct?

A) You will require higher return on stock B, since it yields higher idosyncratic risk than stock A

B) When market is booming, stock B has better return than stock A. When market is down, stock B has worse return than Stock A.

C) Stock A and B could have the same expected return.

D) Since Stock A has no idiosyncratic risk, Stock A has less risk than stock B. You would prefer investing your money in Stock A than stock B.

Reference no: EM131973360

Questions Cloud

What are sayre rights : Sayre's demand to purchase a proportionate number of these shares. What are Sayre's rights, if any? Please explain.
Calculate geometric mean and arithmetic mean : Calculate arithmetic mean. Calculate geometric mean.
Is bender entitled to dividends for 2010 : a. Is Bender entitled to dividends for 2010? For 2011?
B2b buying decisions : Buying centers, sometimes called procurement, are where B2B buying decisions are made.
Arbitrage opportunity-transaction costs or any frictions : Assume that we are living in a perfect capital market, there are no arbitrage opportunity, transaction costs or any other frictions.
Describe the patient education plan : Develop an evidence-based management plan. Describe the patient education plan. Provide information on health promotion or health care maintenance needs.
Why do you think strategic management : Why do you think strategic management can be characterized as both an art and a science?
What analyses would you do to determine risk : What type of risk would you be the most concerned about? Why? What analyses would you do to determine risk?
How does the organizational development : How does the organizational development course compare with life experiences and career goals?

Reviews

Write a Review

Financial Management Questions & Answers

  Foreign company acquisition

Acquisition by a foreign company and the effects of that decision and the results of foreign exchange in Euro and the exchange rate differences.

  Financial management for profit and non profit organizations

In this essay, we are going to discuss the issues of financial management in a non-profit organisation.

  Method for estimating a venture''s value

Evaluate venture's present value, cash and surplus cash and basic venture capital.

  Replacement analysis

This document show the Replacement Analysis of modling machine. Is replacement give profit to company or not?

  Business finance task - capital budgeting

Your company is considering using the payback period for capital-budgeting. Discuss the advantages and disadvantages of this technique.

  Analysis of the investment

In this project, you will focus on one of these: the additional cost resulting from the purchase of an apple press (a piece of equipment required to manufacture apple juice).

  Conduct a what-if analysis

Review the readings and media for this unit, including the Anthony's Orchard case study media. Familiarise yourself with the Anthony's Orchard company and its current situation.

  Determine operational expenditures

Organisations' behaviour is guided by financial data. In the short term, such data will help determine operational expenditures; in the long term, historical data may help generate forecasts aimed at determining strategic plans. In both instances.

  Personal financial management

How much will you have left over each half year if you adopt the latter course of action?

  Sources of finance for expansion into new foreign markets

A quoted company is considering several long-term sources of finance for expansion into new foreign markets.

  Long term financial planning

This assignment is designed for analyze Long term financial planning begins with the sales forecast and the key input in the long term fincial planning.

  Explain the role of fincial manager

This assignment explain the role of fincial manager, function of manger. And what are the motives of financial manager.

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