Explain the main conclusions of the capm

Assignment Help Accounting Basics
Reference no: EM133106689

Question - Consider the Capital Asset Pricing Model (CAPM hereafter):

a) Explain the main conclusions of the CAPM. Describe the equation of the Security Market Line (SML hereafter). Why, under the CAPM, must fairly priced assets plot exactly on the SML? Discuss.

b) Describe how the early tests (Lintner, 1965; Miller and Scholes, 1972) of the CAPM were performed. Also, explain their main conclusions.

c) Apart from simplifying Diversification, what are the advantages of the Single Index Model compared with the Markowitz model for portfolio optimization? What are its disadvantages? Discuss.

Reference no: EM133106689

Questions Cloud

What is the ending balance in the f mercury capital account : The F. Mercury, Capital account has a credit balance of $29,750 before closing entries are made. What is the ending balance in the F Mercury Capital account
What is the correct closing entry for the revenue accounts : Total revenues for the period are $64,200, total expenses are $44,300, and withdrawals are $12,600. What is the correct closing entry for the revenue accounts
What is the depreciation charge for the year ended december : The financial statements for the year ended 31 December 20X7 are being prepared. What is the depreciation charge for the year ended 31 December 20X7
How might healthcare teams achieve therapeutic goals : How might healthcare teams achieve therapeutic goals for individual clients and What factors might lead to the future of the CC/IC delivery model
Explain the main conclusions of the capm : Consider the Capital Asset Pricing Model - Explain the main conclusions of the CAPM. Describe the equation of the Security Market Line (SML hereafter)
Calculate the expected share price and the p-e ratio : A firm projects an ROE of 18%; it will maintain a payout ratio of 40%. Calculate the expected share price and the P/E ratio of the firm
Prepare all necessary journal entries for both situations : On June 15, Seles declared and paid cash dividends of $35,200 to all stockholders. Prepare all necessary journal entries for both situations
Identify the issues and recommend the possible solutions : Identify the issues and recommend the possible solutions to turn around the overall performance in procurement, inventory and forecasting
Calculate the payback period of the investment : These high-tech caravan units are expected to retail at £40,000 each and costs are estimated: Calculate the payback period of the investment

Reviews

Write a Review

Accounting Basics Questions & Answers

  Calculate the WACC for Lulia Apparel plc

The expected return on the market portfolio is 15% and the expected risk-free rate is 4%. Calculate the WACC for Lulia Apparel plc

  Assignment on capstone research project

You have been selected as the consultant to develop a business plan for Durango Manufacturing Company, which is a start-up, medium-sized public manufacturing company.

  Calculate the payback period and accounting rate of return

The new equipment will have a five-year life and cost $320,000, Calculate the payback period and the accounting rate of return for the new production equipment

  Compute depreciation expense on the machine for the year

Compute depreciation expense on the machine for the year ending December 31, 2017, and the year ending December 31, 2018

  Find what book value per ordinary share held by darius is

Darius, On December 1, Alan issued a 2-for-1- stock split. At December 31, 2020, the book value per ordinary share held by Darius is?

  What are total sales in dollars at the breakeven point

If fixed cost total is $8,000, how many unit must the company sell to break even? What are total sales in dollars at the breakeven point

  Find the optimal run size

The cost to prepare the equipment for producing hot dogs is $68. Annual holding costs are 50 cents per hot dog. Find the optimal run size

  Data pertaining to the postretirement health care benefit

data pertaining to the postretirement health care benefit plan of sterling properties include the following for 2013 in

  What is the monetary value of fringe benefits

Fringe benefit tax expense 53 846 fringe benefit expenses 400,000. What is the monetary value of fringe benefits given to rank and file employee

  Lance and wanda dean are married lance works for the

lance and wanda dean are married. lance works for the convention bureau of the local chamber of commerce while wanda is

  What should be price that perkins cove yacht company charges

What should be the price that Perkins Cove Yacht Company charges for the Ogunquit? Assume that the Ogunquit should have the same profit margin.

  Calculate the annual forward rates for one year

At the beginning of 2009, the Market Place was concerned with interest rate levels and the possibility of inflation. Calculate the annual forward rates for one year and two years from now

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