Which of the following statements is true? Group of answer choices Market risk premium is defined as the difference between the market rate of return and the return on risk-free Treasury bills. Diversification decreases the variability of both unique and market risk. A project should be accepted if its return plots below the security market line. Project cost of capital and company cost of capital are synonymous terms.
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- Compare and contrast the risk versus expected rate of return tradeoff, the security market line, and determination of beta on this basis. Include explanation of all the constituents, namely security market line, risk measure, expected rate of return, risk-free rate of return, and market rate of return. Include hypothetical examples for better clarity. What is the weighted average cost of capital (WACC) and its significance?The Capital Asset Pricing Model (CAPM) asserts that an asset’s expected return is equal to the risk-free rate plus a risk premium for: a. Volatility b. Systematic risk c. Non-systematic risk d. Diversification e. Marginal utility of consumptionCompare and contrast the risk versus expected rate of return tradeoff, the security market line, and determination of beta on this basis. Include explanation of all the constituents, namely security market line, risk measure, expected rate of return, risk-free rate of return, and market rate of return. Include hypothetical examples for better clarity. What is the weighted average cost of capital (WACC) and its significance? Can you think of two hypothetical examples for better clarity?
- Please explain the risk vs. expected rate of return tradeoff, the security market line, and determination of beta on this basis. Include explanation of all the constituents namely, security market line, risk measure, expected rate of return, risk-free rate of return, and market rate of return. Include hypothetical examples for better clarity. Explain the weighted average cost of capital (WACC) and its significance and include hypothetical examples for better clarity.In the capital asset pricing model, the general risk preferences of investors in the marketplace are reflected by ________. the level of the security market line the slope of the security market line the difference between the beta and the risk-free rate the risk-free rateConsider the following two statements concerning risk analysis: 1. Sensitivity analysis provides clear decision rules concerning acceptance or rejection of an investment project. 2. The risk-adjusted discount rate adds a risk premium to the expected rate of inflation to derive a discount rate for investment projects. Which one of the following combinations (true/false) relating to the above statements is correct? Select one: a. Statement 1 is False & Statement 2 True b. Statement 1 is False & Statement 2 False c. Statement 1 is True & Statement 2 is False d. Statement 1 is True & Statement 2 is True e. None of these answers are correct
- The capital asset pricing model expresses the cost of equity as a function of a return on riskless assets, a market premium, and: Select one:a. Unsystematic risk.b. None of these.c. The cost of debt.d. Systematic risk.1. Define the components of holding period return. Can any of these components be negative? 2. How do you understand an investment risk and what statistic tools can be used to measure it?Please answer each of the following questions in detail. Please explain the risk vs. expected rate of return tradeoff, the security market line, and determination of beta on this basis. Include explanation of all the constituents namely, security market line, risk measure, expected rate of return, risk-free rate of return, and market rate of return. Include hypothetical examples for better clarity. Explain the weighted average cost of capital (WACC) and its significance and include hypothetical examples for better clarity. Kindly amswer all the sub parts in simple language WITH EXAMPLES.
- Consider the following two statements concerning risk analysis: 1. Sensitivity analysis provides clear decision rules concerning acceptance or rejection of an investment project. 2. The risk-adjusted discount rate adds a risk premium to the expected rate of inflation to deriv a discount rate for investment projects. Which one of the following combinations (true/false) relating to the above statements is correct? O a. Statement 1 True Statement 2 False O b. none of the answer provided are correct Statement 1 True Statement 2 True Statement 2 False c. d. Statement 1 False O e. Statement 1 False Statement 2 TrueIn the context of the capital asset pricing model, the systematic measure of risk is captured by _________. Group of answer choices unique risk beta standard deviation of returns variance of returnsIn the context of the Capital Asset Pricing Model (CAPM), the relevant measure of risk is A. standard deviation of returns. B. beta. C. variance of returns. D. unique risk.