What is the correlation coefficient between returns on any efficient portfolio and returns on the market portfolio in CAPM? 0.5 -0.5 -1 1 0

Q: A project has cash flows of –$148,000, $43,000, $87,000, and $44,000 for Years 0 to 3, respectively.…

A: The IRR is the interest rate that makes the NPV of the project equal to zero.

Q: Can a firm have negative residual income (i.e., abnormal earnings)? What does this mean? Suppose you…

A: The negative residual rate of return will reflect that the company is not able to maintain and…

Q: Determine the future values if $25,000 is invested in each of the following situations: a. 8% for 20…

A: Solution:- When an amount is invested somewhere, it earns interest on it. The amount initially…

Q: A real estate broker has a listing where the seller agreed to should capital gains tax and broker's…

A: Net proceeds are P4,895,000 Commission of the broker is 5% To Find: The selling price of the…

Q: A person borrowed $1000 from Bank A, $1000 The nominal annual interest rate of all 3 banks are the…

A: In this question, we will be determine the value of loan payable after 5 year with the different…

Q: Mr. Samson hired the services of a broker to sell his property. The owner said he bought it at…

A: COST OF PURCHASE OF THE HOUSE = 6300000 REQUIRED GROSS PROFIT = 30% = 6300000*30% = 1890000…

Q: Find the present value and the compound discount of $5622.74 due 10 years from now if money is worth…

A:

Q: Convertible securities can usually be sold with interest rates ____ other nonconvertible securities…

A: Convertible securities are securities which can be exchanged by predetermined number of common…

Q: Zero-coupon bonds are issued at prices below face value, and the investor's return comes from the…

A: Concept. Zero coupon bonds. Zero coupon bonds are the bonds that do not pay any interest to its bond…

Q: Misu Sheet, owner of the Bedspread Shop, knows his customers will pay no more than $145 for a…

A: Mark up are important for business and companies because they can not survive without profit and…

Q: Assume that time today is Dec. 13, 2022. Determine what is being asked in each problem. 1.…

A: The the future value of amount represents the amount that is being initial and amount of interest…

Q: 0,000 mortgage was amortized over 20 years by monthly repayments. The interest rate on the mortgage…

A: Loans are paid by the monthly payment and these are fixed payments and these carry the payment for…

Q: Evaluate four major ways through which a company  can  raise capital for expansion purposes     With…

A: There are many ways in which company can increase its share capital

Q: How life insurance contracts are different from other financial services or products?

A: Life insurance is a form of financial protection that helps individuals and families prepare for the…

Q: As the number of stocks in a portfolio increase, the portfolio’s systematic risk can either increase…

A: Solution: When an investor invests in equity market, it get exposed to two types of risk- a)…

Q: B.

A: That measures the liquidity aspects of the company. These 2 are. Current Ratio- = current assets…

Q: Beam Cable Company is considering investing $450,000 in telecommunications equipment that has an…

A: Year Cash flows 0  $           -4,50,000.00 1  $            1,20,000.00 2  $…

Q: Three financial institutions (A, B, C) offer different investment rates: Rounding your answers to…

A:

Q: Watch the scene in Moneyball when Billy Beane (Brad Pitt) upends the meeting with the personnel…

A: The Moneyball scene when Billy Beane (Brad Pitt) upends the meeting with the personnel scouting team…

Q: The dividend discount model will be most useful in estimating the value of which company? A company…

A: Dividend discounting model is a model for evaluating the intrinsic value of the company on the basis…

Q: mino’s Pizza, Inc. (DPZ)’s return on equity (ROE) is closest to   A. 20.14%. B. 17.46%. C.…

A: Return on equity can be found by the Dupont equation by decomposition into three parts profit…

Q: A put and call on the same underlying share each have strike price 25 and expiry date 2 years. Which…

A: We have given a target payoff. We have to create the position in options so as to always get the…

Q: 2. An asset purchased 2 years ago for P40,000 is harder to maintain than expected. It can be sold…

A: Annual worth is calculated over one life cycle of the asset and is usually used to compare the…

Q: Orange Corporation has a standard deviation of 25% and an expected return of 10 percent. Violet…

A: Standard deviation of portfolio is calculated using following equation Standard deviation =…

Q: rican country

A: Given the investment principal at zero time = 100000, it will grow @28% per annum, but the amount…

Q: A firm is in a world with (a) taxes, (b) costs of financial distress, (c) agency conflicts between…

A: The increase of financial leverage will be providing benefits of company in terms of taxes because…

Q: EOY O (Investment) BTCF 1 1,000,000 2 (1,000,000) ddition, the salvage value of the project at the…

A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: Capital expenditures are ___ on the proforma but are ____ for income tax purposes. Group of answer…

A: Capital expenditures are expenses of long-term nature that increase the earning capacity of the…

Q: five years bond with face value $1000 , annual interest of 5% for $860 bond value. The coupon…

A: Given: Particulars Amount Face value (FV) 1000 Annual interest rate (Rate) 5% Current price…

Q: uppose that the current EUR/GBP exchange rate is £0.86 per euro. The current 6-month interest rates…

A: In the international business exchange rate matter the most and the volatility in the exchange rate…

Q: ABC bank can provide you with a 30- year 250,000 FA-FRM mortgage, with an annual interest rate of…

A: Any fixed periodic payment made to either pay off debt or accumulate funds for a specified purpose…

Q: Stock X has a beta of 0.7 and Stock Y has a beta of 1.7. Which of the following statements must be…

A: CAPM would give the risk based required rate of return on the stock and quite used extensively to…

Q: Question 12 Common information: A loan is amortized by level payments made at the end of each…

A: The amortization schedule refers to the breakdown of the periodic payments into interest and…

Q: Suppose you borrow $15,000 and then repay the loan by making 12 monthly payments of $1,297.92 each.…

A: The fixed regular periodic payments made to repay any debt or accumulate funds for a specified…

Q: ne Oil & Gas is considering an investment in Perfect Lease. Given the following information,…

A: Payback period is the period required to recover the initial amount of investment and do not…

Q: te = 4% convertib

A: reflect the risk-free rate as a compounding factor and the dividend as discounting factor. No…

Q: A $1,000 par value bond with an annual coupon rate of 5%, and callable at $1,050, can be converted…

A: concept. Convertible Bonds are the corporate bonds that can be converted into common stock of the…

Q: Ranger Enterprises is considering pledging its receivables to finance a needed increase in working…

A: Pledged Receivables: Accounts receivable are the assets  company provide to a lender as security for…

Q: Should an increase in the volatility of a firm's stock returns be associated with an increase in the…

A: A Call Option is the option(right but not obligation) to purchase an underlying security at…

Q: Use simple interest to calculate the cash price of the following bond: 5,000 USD, 8% bond with…

A: Cash price of bonds = Face value of bonds * Purchase price (%)

Q: Citadel invests $65.75 billion in each of Samsung Hedge Fund (SHF) and Apple Hedge Fund (AHF).…

A: concept. rate of return to investor =   capital appreciation - management fees - incentive…

Q: So-called "payday loans" are targeted primarily at "poor people" O True O False QUESTION 43 Term…

A: Pay-day loans are short-term loans that allow the person to borrow until the next payday. The…

Q: Mention and explain in brief any two ways for a company to reduce it's cash conversion cycle.

A: Cash conversion cycle is the length of time it takes to convert resources such as inventory and…

Q: Security selection refers to top-down analysis. O investing only in "safe" securities. the…

A: Investment analysis of various individual will depend upon sectoral analysis and security selection…

Q: Trevor took a loan of $7,700 from her parents to purchase equipment for her hair salon. If they…

A: We have to find the quarterly payment that will amortize the loan in full. It's a time value of…

Q: A defined benefit plan has 100 employees with a majority of them over age 40. The pension fund…

A: Defined benefit plan - This is an employer sponsored predetermined pension payment plan. This plan…

Q: Calculate the accumulated value of monthly payments of $100.00 made at the end of each month for ten…

A: The regular fixed periodic payments made either at the end or at the beginning of each interval are…

Q: A real-estate developer seeks to determine the most economical height for a new office building,…

A: Present worth is computed by calculating and adding present value of cash flows associated with…

Q: Cede & Co can borrow at 11 percent.  Cede currently has no debt, and the cost of equity is 12…

A: Repurchase of shares  means the management of the company will buy back the shares that have been…

Q: how to calculate property loss claim average

A: To calculate the property loss claim average, you would need to sum the total amount of all property…

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary. 

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.