Calculate the return suitable for a share of common stock, Financial Management

Assignment Help:

Given that risk-averse investors demand more return for taking on much more risk while they invest, how much more return is suitable for, say, a share of common stock, than is suitable for a Treasury bill?

Even though we know that the risk-return relationship is positive, the question of much more return is appropriate for a given degree of risk is particularly difficult.  Unluckily, no one knows the answer for sure.  One famous model employed to calculate the required rate of return of an investment, given its degree of risk, is the Capital Asset Pricing Model that is abbreviated as CAPM.


Related Discussions:- Calculate the return suitable for a share of common stock

Portfolio classification of mutual funds, Portfolio Classification of Mutua...

Portfolio Classification of Mutual Funds Mutual Funds differ with reference to the type of instruments in which the money has been invested as per the requirements of the inves

Agency relationships, explain the relationship between shareholders and cre...

explain the relationship between shareholders and creditors

Long and short dated volatility, Q. Long and short dated volatility? 1....

Q. Long and short dated volatility? 1. If an investor purchase long-dated volatility as well as sells short-dated volatility then the investor is expecting a decrease in the sh

par value, The face value of the debt security can be thought of as ...

The face value of the debt security can be thought of as the principal amount on which interest is paid by the issuer. It is the amount the issuer is willing to r

Treasury inflation-protected securities or tips, Treasury Inflation-P...

Treasury Inflation-Protected Securities (TIPS) are the inflation-indexed bonds, the US Treasury offers. The first offer was made in the year 1997. As the name sug

Fm, challenges that the finance manager face in fulfilling the managerial f...

challenges that the finance manager face in fulfilling the managerial function

Return payment method, when asked to calculate return method given cash flo...

when asked to calculate return method given cash flow before depreciation how do you do it

Financing costs incorporated into capital budgeting analysis, How are finan...

How are financing costs generally incorporated into the capital budgeting analysis process? Financing costs are generally captured in the discount or hurdle rate while doing NPV

Operating and financial leverage, explain the significance of operating lev...

explain the significance of operating leverage and financial with the help of example?

Prices and yields, Prices and Yields The face value of the government s...

Prices and Yields The face value of the government security is Rs.100 or Rs.1,000. Earlier, that is, before 1950s the government bonds were issued at a discount. There was no f

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