Higher a stock’s volatility, why does the higher the probability of large increases or decreases in market price?

Q: What is the break-even stock price for the protective put?

A: A protective put is when an investor has bought (long) the underlying asset and at the same time…

Q: The wider the dispersion of returns on a stock, the:

A: Investors evaluate the portfolio or security on the basis of risk profile. The risk profile can be…

Q: what is the return of stock a what is the return of stockb what is the standard deviation on stock…

A: Given: tate Probability(P) Return A Return B Poor 40% -0.08 -0.15 Normal 35% 0.19 0.14 Good…

Q: Evidence suggests that there may be _______ momentum and ________ reversal patterns in stock price…

A: Momentum is referred to as the speed or velocity of price changes in a stock

Q: n is it appropriate to use the dividend valuation models, such as the Zero Growth Model, constant…

A: Dividend discount model is used or valuation of the companies and quite used frequently.

Q: How does higher expected growth affect a stock’s value?

A: Stock value is referred to as the shares of the corporation, which used to appear to trade at the…

Q: How can you chart and predict falling or rising wedges for stocks?

A: Short-term, medium-term, and long-term trends: Stock Prices move either upwards, downwards, or…

Q: What does the meaning of maximum and minimum price in the stock performance graph? how to know which…

A: Succinctly summarized, a stock chart is a graph that illustrates the price of a stock over a certain…

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: Why might the stock price changing make sense within the context of risk and return?

A: Stock price movement is dependent on various factors which would eventually impact the required rate…

Q: Is stock with Increasing dividend yield and decreasing market price per share a good stock to…

A: Dividend yield is the amount of money given to shareholders for owning a share of a company's stock…

Q: What is a stock’s volatility?

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

Q: Patterns that show a stock will skyrocket up

A: A trend is the wide upward or downward movement in the price of a stock over time. Upward movement…

Q: Calculate the expected return for Stock A.

A: Expected Return: It represents the profit or loss expected by an investor on an investment. It is…

Q: If investors’ aversion to risk increased, would the risk premium on a high-beta stock increase by…

A: Aversion to risk is essentially the decision to not take more risk Beta of the stock specifies the…

Q: If the expected rate of return on a stock is less than its required rate of return, investors will…

A: The expected return on the stock is compared with the required return on that stock to identify over…

Q: What is relationship between the market risk of a stock and it's expected return?

A: Expected return is directly related to the market risk . Market risk is represented by beta. Higher…

Q: a) Discuss why international stock might have high volatility but low betas.

A: Beta is the sensitivity of the price of an asset to movements in the market as a whole and is a…

Q: Why is beta the theoretically correct measure of a stock’s risk?

A: Introduction: Risk refers to the degree of volatility involved in the anticipated return on…

Q: To what extent does investor mood contribute to the observed fluctuati

A: Introduction : In simple words, the given question relates to the concept of emotion investing,…

Q: How GARCH (generalized ARCH model) model is applied to Stock Price Volatility?

A: GARCH model is one of the models that is usually used by the financial analysts. The financial…

Q: The return of stock B is __% The volatility of stock A is __% The volatility of stock B is __%

A: Thank you for posting questions. Since you have posted multiple questions, as per the guideline I am…

Q: "Volatility smile" is referred to as evidence against the Black-Scholes model. Why is that? а.…

A: Volatility is a statistical measure of the spread of returns for a particular securities or market…

Q: How do you find the market risk premium and market expected return given the expected return of…

A: The rate of return earned by the investor over the risk-free rate of return is considered as market…

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: Which of the following statements true? I. A call option price is increasing in stock return…

A: Buying options give the buyer the right, but not the obligation, to buy or sell the underlying asset…

Q: What is the expected return on the firms stock

A: Here, Proportion of Debt is 75% Proportion of Equity will be (1-75%) = 25% Cost of Debt is 5% Risk…

Q: Are stock prices affected more by long-term or short-termperformance? Explain.

A: Answer: The stock prices are influenced by results in both the long and the short term. The…

Q: The Capital Asset Pricing Model (CAPM) says that the risk premium on a stock is equal to its beta…

A: Capital asset pricing model is a formula that projects the relationship between systematic risk and…

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: If investors’ aversion to risk increased, would the risk premium on a high-beta stock increase more…

A: The market hazard premium is determined by taking away the market return chance free rate and the…

Q: Which of the following will (holding everything else constant) cause the price earnings (P/E) ratio…

A: The price to earning ratio is the ratio of current market price with respect to the earning per…

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: One way to model an option with dividends in the binomial framework is for the stock price minus the…

A: Binomial option pricing is used to value options by taking multiple periods and the outcome of up…

Q: how much of your capital (what weight) would you invest in stock A to maximize your portfolio's…

A: Weight for minimum risk is that point on which investor will received the highest return with…

Q: An optimal forecast made using rational expectations provides a certain rate of return for a stock.…

A: Since you have posted multiple questions, we will be solving only the first question as per the…

Q: . What effect does increasing inflation expectations have on the required returns of investors in…

A: Interest refers to the amount charged by the lender on the lent amount. The borrower of the loan is…

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: According to Technical Analysis, a stock velocity statistics most closely resembles which of the…

A: "Hi, Thanks for the Question. Since you asked multiple question, we will answer first question for…

Q: Explain why international stock might have high volatility but low betas.

A: Beta measures the movement of the stock as compare to the whole market. Volatility is defined as a…

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: a) Differentiate between value and growth stocks? Briefly summarise the evidence relating to the…

A: Since you have asked multiple questions, we will solve the first question for you. Please ask…

Portfolio Management

Portfolio management is the process by which an investor decides that how the person will invest in a variety of assets in order to get a desired return in the future. A portfolio means a pool of assets that includes securities, bonds, and other investment instruments which helps in risk minimization of the money that has been invested. In other words, it can be said that a portfolio means a combination of assets in which an investor decides to invest their money in order to get a lump sum return in the future or even a series of cash flow that the person is expecting at the end of their job life.