estion 1 If an investor holds only stocks in Tencent, the relevant measure of risk will be Beta on the Tencent stock Correlation of Tencent’s return with the market return Covariance between Tencent’s return and the market return Standard deviation on Tencent’s return Explain your answer. with example
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.
question 1
If an investor holds only stocks in Tencent, the relevant measure of risk will be
Beta on the Tencent stock
Correlation of Tencent’s return with the market return
Covariance between Tencent’s return and the market return
Standard deviation on Tencent’s return
Explain your answer. with example
Step by step
Solved in 2 steps
