When is a stock said to be in equilibrium? Why might a stock at any point in time not be in equilibrium?

Q: How does preferred stock differ from bothcommon equity and debt? Is preferred stock morerisky than…

A: Difference between equity stock and preference stock: Both equity shares and preference shares…

Q: .What is the value of the stock?

A: The constant growth model is a method used for finding the stock price. It is also called the…

Q: What’s the difference between a stock’s current market price and its intrinsic value?

A: Stock Current market price is the price at which the stock traded in the market.   Intrinsic value…

Q: If there is a stock which is substantially overvalued, where it should plot relatively to the SML?…

A: SML or Security Market Line:- It is an graphical representation of CAPM model. SML graph is being…

Q: Which of the following is always negatively related to the price of an American call option on a…

A: Volatility and price are inversely related. Answer is volatility.

Q: Which of the following events are likely to increase the market value of a calloption on a common…

A: The question is based on the concept of valuation of call option.  The value of call option is…

Q: Explain with examples of how an option holder gains or losses from an increase in the volatility of…

A: Option buyer buys a right to exercise buy or sell, at the time of their benefit, at a pre-defined…

Q: what would be the stock price?

A: Current stock price refers to the present value of the share based on the future expected payoffs.…

Q: What is the ‘intrinsic value’ of a stock and what does it tell us?

A: Intrinsic value refers to a company's, stock's, currency's, or product's expected or calculated…

Q: Is stock price maximization good or bad forsociety?

A: Answer: Maximization of stock prices occurs because it benefits the society at large. The stock…

Q: Explain why common stock is itself like a call option. What plays the role of the exercise price and…

A: There are two types of options in the market: call options and put options.  Call options allow the…

Q: How is risk defined and measured? How might the magnitude of the market risk premium impact…

A: In financial terms, the risk is referred to as the possibility that an outcome's actual gains will…

Q: What is a stock’s volatility?

A: Stock Volatility:   Volatility is defined as a statistical measure of the dispersion of the returns…

Q: What is risk aversion, and how is risk aversion related to the expected return on a stock

A: In the world of investment, the risk appetite of the investor is an important consideration when…

Q: Describe two conditions which will determine whether or not a stock is in equilibrium. Can either of…

A: Equilibrium refers to a state of rest or a situation where demand is equal to supply. At point of…

Q: How to use call options and put options to create a synthetic short position in stock?

A: An options are actually touted as one of common method for the profit from the swings of the market.…

Q: Can an investor eliminate market risk from a portfolio of common stocks?

A: Beta is a systemic risk of this kind. The risk integral to the business or segment as a whole is…

Q: How does the price of a call option respond to the following changes, other things equal? Does the…

A: Price of an option depends on following factors: Strike price or exercise price, Time to maturity,…

Q: what is the terminology for the lowest price listed on a stock market exchange at which an investor…

A: Stock price represents the worth of the stock. The market price, buyer price, ask price, and bid…

Q: What is a firm’s intrinsic value? Its current stock price? Is the stock’s “true” long-run valuemore…

A: An estimation of the true value of the stock of the company by considering the risk and return…

Q: Which of the following techniques is used to value stock options?   a. Black-Scholes method b.…

A: black scholes method is used to value options

Q: Why are the probabilities of stock price movements not used in the binomial model for calculating an…

A: The binomial option pricing framework was established in 1979 as a technique for valuing options.…

Q: What does it mean to say “stock prices are nonstationary”?

A: Stock prices will be discovered by continuous interaction of demand and supply. Stock prices are…

Q: How does the current price of a stock depend on its own past values, as well as the current and past…

A: Market index of stock gauges the stock market which assists investors to analyze the market…

Q: what is the difference between individual stocks and the stock market

A: Investing means allocating the funds in different securities, assets, or businesses with the motive…

Q: Why do call options with exercise prices greater than the price of the underlying stock sell for…

A: To understand this statement, we consider a practical example Let stock have current price…

Q: What is the expected return for stock A?

A: Expected Return: It is computed by the sum of individual returns proportionately weighted by each…

Q: What are the steps in valuing a call option when the binomial tree describing an underlying stock…

A: The valuation of a call option can be done with the help of two models such as Black-Scholes model…

Q: How is the intrinsic value of the call option impacted as the stock price changes? How is the time…

A: 1) Intrinsic value of a call option for a trader is the current value of the option. It is the…

Q: How does market cap effect the stock market?

A: Market capitalization is given by the formula: Market capitalization = Price per share x No. of…

Q: How will the change in required return influence the price of a stock? How will the dividend growth…

A: The Gordon growth model calculates the price of the stock by using the dividends, growth rate of…

Q: What is meant by the delta of a stock option?

A: It is certain for call options and negative for put options. That is on the grounds that an increase…

Q: Stock X has the following data. Assuming the stock market is efficient and the stock is in…

A: The Constant Growth Model was developed by Gordon. This method assumes that a company grows at a…

Q: Let's explore the difference between "expected" and "actual" return of a stock. 1) How might we…

A: 1) The expected return (also known as the "expected rate of return") is the profit or loss that can…

Q: If stocks shouldn’t be issued for a consideration less than the par or issued price thereof, why do…

A: Par value is also known as the nominal value of face value at which a security is issued or can be…

Q: If the stock price falls and the call price rises, then what has happened to the call option’s…

A: Options are derivative contracts, it gives an investor the right (but not obligation) to buy or sell…

Q: hat is the relationship between the expected return of a stock and its fair expected return? When is…

A: Step 1   The anticipated return is the profit or loss that an investor expects from a known…

Q: uss whether the stock pric n in the stock market.

A: Efficient Market Hypothesis -:An significant debate in investors is whether the stock market is…

Q: Why Are Stock PricesSo Volatile?

A: The prices of stocks listed on stock exchanges are dynamic and change every minute. Volatility is…