Describe two conditions which will determine whether or not a stock is in equilibrium. Can either of these conditions show the stock is in equilibrium? Please use a numerical example to describe your response

Q: An ideal value-relevant attribute is one for which the correlation coefficient of the values of the…

A: +1 correlation indicates positive correlation whereas -1 indicates negative correlation.

Q: Assuming no other changes to the limit order book, which of the following statements is always true?

A: In resulting from the placement of a new limit order only depth and width are changes . Remaining…

Q: d. Suppose a new stock, C, with f = 18% and b = 2.0, becomes avail- able. Is this stock in…

A: Beta is calculated by slope function in excel with market return as known x and stock return as…

Q: A class of Efficient Market Hypothesis that implies all public information is calculated into a…

A: Efficient Market Hypothesis is the market theory which depicts that market is generally efficient…

Q: Which of the following statements regarding P/E multiple is NOT correct? Group of answer choices A…

A: The term P/E multiple stands for the price to earnings multiple. This ratio can be used by investors…

Q: Common stock has par value, and market value. Explain briefly these values. Which one is most…

A: Par value of common stock : Par value corresponds to the equity valuation specified in the corporate…

Q: If an investor places a market order, the stock will be sold if its price falls to the stipulated…

A: A stop-loss order is an order by the investor to stop his/her's losses if the the stock price falls…

Q: Evaluate the following statement: “Two stocks should be viewed as equally risky because they have…

A: Let us understand the above terms with a help of an example. Say, the Expected return of Stock X is…

Q: In the Black-Scholes option pricing model, the value of a call is inversely related to: a. the…

A: Time to expiration denotes the time period between the formation of derivative contract and the…

Q: Fundamental and technical are two types of stock analysis Select one: a. False b. True

A: Two types of stock analysis is:- 1) Fundamental - Fundamental analysis uses data from sources,…

Q: Explain in detail with an example how the change of the variables (like Stock Price, Exercise Price,…

A: Black Scholes Merton is an option valuation model. In Black Scholes Merton formula, there are five…

Q: What impact does each of the followingparameters have on the value of a call option?(1) Current…

A: Call option: Call options are financial agreements that give the holder of option the right, but not…

Q: When you place a limit order, it means you are willing to buy or sell the stock at the best price…

A: limit order allows  to purchase or sell a shares at the price you have set or a better price. For…

Q: What are three techniques stockholders can use to motivate managers to maximizetheir stock’s…

A: Managers are required to motivate so that they can work specifically for achieving a predetermined…

Q: When is a stock said to be in equilibrium? Why might a stock at any point in time not be in…

A: When buying or selling a stock, investors are indifferent. There is no inherent imbalance if a stock…

Q: Explain why common stock is itself like a call option. What plays the role of the exercise price and…

A: There are two types of options in the market: call options and put options.  Call options allow the…

Q: How to use call options and put options to create a synthetic short position in stock?

A: An options are actually touted as one of common method for the profit from the swings of the market.…

Q: Is a put option on a high-beta stock worth more than one on a low-beta stock? The stocks have…

A: Meaning of beta Beta is a sensitive measure of firm specific risk in respect to market risk. It tell…

Q: porfolios risk.

A: Stocks when added again & again to the portfolio would reduce the standard deviation & rp…

Q: We showed in the text that the value of a call option increases with the volatility of the stock. Is…

A: Put-call parity theorem: As per put-call parity theorem, there exist an equivalence relationship…

Q: Following is information for two stocks:   Investment    r        σ   Stock X        8%     10%…

A: Relative risk can be judged by comparing the coefficient of variation (CV) of both the securities.…

Q: How will you know if you think a certain stock will be more or less volatile in terms of price…

A: Investors have different options to make investments, and the motive behind investments is to…

Q: How does the price of a call option respond to the following changes, other things equal? Does the…

A: Price of an option depends on following factors: Strike price or exercise price, Time to maturity,…

Q: what is the terminology for the lowest price listed on a stock market exchange at which an investor…

A: Stock price represents the worth of the stock. The market price, buyer price, ask price, and bid…

Q: Because of the put-call parity relationship, under equilibrium conditions a put option on a stock…

A: Options are of 2 types: Call option Put option   Portfolio: 1) Put option and stock2) Call option…

Q: Describe the effect of a change in each of the following factorson the value of a call option: (1)…

A: An agreement where the holder has a right to purchase or sell the shares at a specific price at a…

Q: A close family friend has approached you to help her determine which of the two common stocks she…

A: Expected return is that which was based on past track record of company with the help of expected…

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 are the steps in valuing a call option when the binomial tree describing an underlying stock…

A: The valuation of a call option can be done with the help of two models such as Black-Scholes model…

Q: The buyer of a call option on stock benefits if the underlying stock price rises or if the…

A: Call option is in the money if the exercise price is low than the spot price

Q: in

A: The stock also referred to as equity is a form of security that indicates that the holder of the…

Q: Step by step explaination (use attached diagram)   This question relates to Diagram 6 from the…

A: The investors are categories on the basis of their risk tolerance capability. A person who is taking…

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: The fair value of a stock can be determined by the factors of market forces Select one: a. True…

A: Fair value of stock is its fundamental value. It is the intrinsic value of the stock and does not…

Q: If an investor places a _________ order, the stock will be sold if its price falls to the stipulated…

A: See below the definition

Q: Which of the following is/are true about the Efficient Markets Hypothesis (EMH) (I) The rate of…

A: Efficient market hypothesis believes that if market are efficient than it is impossible to make…

Q: What are some analyzes we can do to predict which stock will go up?

A: Stock price movement is primarily speculative in the short term (two to three months). The price…

Q: The Valuation Principle states that the value of a stock is equal to the present value​ (PV) of both…

A: The value of share is much similar to the value of bond. In both future cash flows are discounted…

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.