You are considering investing in a project with the following possible outcomes: Probability of Occurrence 30% 45% 25% States Economic Boom Economic Growth Economic Decline Investment Return 20% 0% -10% Calculate the expected rate of return? Calculate the standard deviation for this investment (use up to 4 decimal places for calculation and answer response)

Q: What are the responsibilities of an originator?

A: The originator's responsibilities are: Originator communicates with all borrowers of mortgage loans…

Q: What are the scopes of the IPSASs?

A: Financial Accounting- It is the branch of accounting that records events of financial nature that…

Q: What is Scenario Analysis?

A: Scenario analysis is an important step in the financial modelling. This is used to show the possible…

Q: What exactly are ESOPs? What are some of its benefits and drawbacks?

A: Introduction: ESOP: Employee stock ownership plan is retirement plans for employees of the company…

Q: What assumptions underlie the EOQ model?

A: The model that helps in calculating the optimal amount of quantity needs to be purchase for…

Q: What is lead arranger?

A: The lead arranger is a firm or group that helps companies to float their stocks in the market. It…

Q: What is the purpose of physical contols

A: Physical controls are basically to safeguard the assets of the entity which are highly valuable. It…

Q: What is differential analysis?

A: Differential analysis: An analysis which only considers changes in income and expenses of an entity…

Q: How do you think the "organizer of activity"?

A: The question seems confusing. Therefore, I am answering the following terms: Organized activity…

Q: What is a constraint?

A: Internal Control:   It refers to a set of rules, policies adopted by a business to ensure accuracy…

Q: purpose of FA

A: FASB stands for Financial Accounting Standards Board. It is a non-profit organization that follows…

Q: What are the key assumptions of the CAPM?

A: Introduction: The CAPM is an equilibrium model that stipulates the relationship between necessary…

Q: What are ESOPs? What are some of their advantages anddisadvantages?

A: ESOP: Employee stock ownership plan is retirement plans for employees of the company wherein the…

Q: What is GAAP and why it is needed?

A: GAAP - Generally Accepted Accounting Principles

Q: What is GAAP and how does it work

A: The accounting is based on various principles that are defined by GAAP or IFRS.

Q: How is materiality concept applied?

A: Accounting principles:

Q: What is the objective of having a conceptual framework?

A: Conceptual framework means set of rules and guidelines that help the users and preparers in…

Q: What is counterbalancing?

A: Errors: The comparability and consistency of the financial statements decreases when a company…

Q: What are the functions of the conceptual framework under IFRS?

A: International Financial Reporting Standards:   IFRS (International Financial Reporting Standards) is…

Q: What is sensitive analysis?

A: Sensitive analysis is a method for predicting the outcome of a decision if a situation turns…

Q: What is the relevant range?

A: The concept of relevant range is used in the cost accounting. It tells under what level of…

Q: What is forward points?

A: Forward points are nothing but basis points added or subtracted from the spot rate of an underlying…

Q: What is meant by the term decentralization?

A: Decision-making process:Decision making can be defined as the process of making choices through the…

Q: What are the types of external user?

A: Entity needs to prepare a financial statement for the use of internal and external decisions making.…

Q: what is Reference control ?

A: I assumed as a question, as what is meant by the reference  to cost control?

Q: What are the operating activities? Give some examples?

A: The statement of cash flows is the statement which shows the change in the cash and cash equivalents…

Q: Define the term Force account?

A: Financial Accounting:   It refers to the process of recording the financial transactions of the…

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.