What is the relationship between present value and future value?

Q: relationship between Future Value Factor and Future Value of an Annuity Factor

A: Future value factor is the equivalent value at the some future date of a cash flow at time 0. For…

Q: How do the Internal-Rate-of-Return Criterion relate to the PW Analysis?

A: Capital budgeting:   It is the process in which the business uses to determine which proposed fixed…

Q: Discuss Present Value of Perpetuities?

A: Perpetuity is the stream of cash flows or payments that are made at equal intervals that do not have…

Q: What is market value ratio?

A: Ratio is the relation between two different quantities obtained after dividing one by another.

Q: Differentiate between price risk and reinvestment risk.

A: Price risk is the risk of decline of the price of the investment or an asset after the underlying…

Q: Define the term capitalized cost?

A: A Capitalized Cost is the cost incurred in the purchase and financing of fixed assets. It includes…

Q: analysis? What are identified as possible risks associated with cost

A: Definition: A technique for calculating the costs related to a business prospect or proposal, as…

Q: Define the term internal rate of return?

A: The internal rate of return (IRR) is a capital budgeting metric used to gauge the benefit of…

Q: Define the term Risk-free real return?

A: Risk-free real return is a hypothetical number that mirrors the foreseen return on a venture that…

Q: what about in terms of present value?

A: Present value helps us know the value of future cash flows in the present time. A higher interest…

Q: What is the Aggregating Risk over Time?

A: Aggregating Risk over time is the measure of a solitary customer's presentation of a foundation or…

Q: what is the effect of making changes to net present value calculations

A: Net Present Value = Present value of future cashflows - Initial Investment

Q: What is net present value?

A:

Q: If US dollars gets lower interest rates in the United States. How would this affect a fundamental…

A: There are two methods to calculate the future or forward currency exchange rates - Interest rate…

Q: What is the meaning of economic value added (EVA)? What does it measure? Why is it important?

A: Economic value added ("EVA") measures a company's financial performance based on the excess wealth…

Q: What is the horizon value? Why is it also called the terminal valueor continuing value?

A: Horizon value is the value of the expected dividend that will be received after the horizon date.

Q: a present obligation?

A: Given: To explain the economic resource and the present obligation as,

Q: Write the methods of Calculating Interest?

A: Methods of calculating interest: The basic and fundamental methods for calculating interests are…

Q: Define the term current market value.

A: The current market value (CMV) gives parties interested in making a transaction the approximate…

Q: What is the concept of present value? What is discounting?

A: Present value means value of future cash flows in todays terms.

Q: How is the payback period determined?

A:

Q: What is fundamental value or price?

A: Fundamental value is a measure of what an asset's worth. This gauge is acquired by methods for an…

Q: What is intrinsic value or price?

A: Intrinsic value: Intrinsic value denotes to an investor's view of the intrinsic worth of an asset,…

Q: What is current market value? Describe about it.

A: Market value: Market value is the price at which, both seller and buyer agree to exchange the…

Q: rice of Home Depot stock is trading for $325 per share. You believe the price is too high. If the…

A: When you trade in the stock market than purchase at right price is important because other wise you…

Q: What is future value, FV?

A: Future Value: The future value is the value of the present amount compounded at an interest rate…

Q: What is risks and interest rate

A: Risks and interest rate are tied together in case of fixed income instruments like bonds.

Q: What is opportunity cost rate?

A: The opportunity cost is the cost of the option or alternative missed due to the acceptance of the…

Q: What is the concept of present value? How does it affect inflation

A: Increase in general price levels in an economy is known as inflation. Due to inflation, the cost of…

Q: What is discounting and compounding? What is the difference between them?

A: We need to use the equation of time value of money to explain the concept of discounting and…

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.