If prices are as likely to increase as decrease, why do investors earn positive returns from the market on average?

Q: How does the correlation between two stocks change the level of benefit that diversification given…

A: MEANING OF CORRELATION In case the returns of the two securities move in the same direction…

Q: When investing for a long term, investors care about the volatility of A. mean, average B. mean,…

A: Volatility is used to measure the tendency of security in stock exchange wherein the security price…

Q: When analyzing key macroeconomics to assess GDP growth/decline, how would you measure the…

A: Hey, since there are multiple questions posted, we will answer the first question. If you want any…

Q: According to the market segmentation theory, short term-term investors will not normally switch to…

A: Market segmentation theory is also referred to as segmented markets theory.

Q: Under the expectations hypothesis, if the yield curve is upward-sloping, the market must expect an…

A: Under the expectations hypothesis, if the yield curve is upward-sloping, the market must expect an…

Q: Suppose that as the economy moves through a business cycle, risk premiums also change. For example,…

A: Efficient market hypothesis explains that the prices of the securities reflect all the information…

Q: What is the random walk hypothesis, and how does it apply to stocks? What is an efficient market?…

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

Q: What happens when investors rate of return is greater than YTM and coupon rates?

A: The coupon rate of a bond is the annual rate of interest it pays, whereas the yield is the rate of…

Q: What is the reason for investors to track moves in the yield curve? Please discuss in more depth and…

A: A yield curve is a graphical representation of the different interest rates that the bonds yield but…

Q: 1. If the financial market is informationally efficient, then you, as an investor, on average,…

A: “Since you have posted multiple questions, we will solve the first question for you. If you want any…

Q: So if the Return = (Total Dividend + change in market price ) / purchase Price, then why is the…

A: The total return is the actual rate of return on an investment or pool of investments during a…

Q: Which of the following is true according to the pure expectations theory? Forward rates:a.…

A: The theory of forward interest rate would be equivalent to the anticipation of savers on future…

Q: Explain all you know about “efficiency of financial markets”. What are the evidences for and against…

A: Efficiency of financial markets depends on the fact that whether all the facts and figures regarding…

Q: Ceteris paribus, current financial market returns will increase as

A: Capital goods are those fixed assets for the company which help in the production process. They are…

Q: If interest rates in the economy are high, then a firm would use a MARR higher than current interest…

A: MARR : Minimum acceptable rate of return is the return which the investors need from the project to…

Q: How does the constant–growth model influence financial decisions regarding risk and return?

A: The constant growth model, or Gordon Growth Model, is a method of esteeming stock. It expects that…

Q: If the efficient market hypothesis is true, what are the implications for the investors?

A: Efficient market hypothesis: Efficient market hypothesis assumes states that stocks are traded at a…

Q: If you observe open interest is increasing and prices are moving higher, which of the following…

A: Technical analysis is the technique that tries to predict future movements of the market by studying…

Q: The underlying assumptions of technical analysis are that A.price move in predictable patterns B.…

A: Technical analysis aims at predicting the price movements of securities by using market statistics…

Q: To what extent does investor mood explain price fluctuations? Explain

A: Investor:- A person or other entity (such as a company or mutual fund) who invests money in the…

Q: What will you do if your market does not develop as quickly as you predicted? What if your market…

A: There are four ways to predict the market- 1)-Momentum 2)-Mean Reversion 3)-Martingales 4)-The…

Q: Correlations change over time. Assets more strongly positively correlated wh market crashes, and…

A: A portfolio is a collection of financial assets such as stocks, bonds, commodities, cash and cash…

Q: Under what circumstances might a company have a highp/e ratio even when investors are not optimistic…

A: Ratio analysis is a tool used by the financial analyst to measure the financial performance of the…

Q: Use the following information on states of the economy and stock returns to calculate the expected…

A: An expected return is calculated by multiplying potential outcomes by the there probabilities

Q: Why the following effects are considered efficient market anomalies? Are there rational explanation…

A: Market anomalies are referred to a situation where the stock prices are not changed as per the…

Q: Which of the following statements is CORRECT about the yield curve? A) The yield curve shows the…

A: The relationship between interest rates and time to maturity is depicted by an yield curve. When the…

Q: n efficient market hypothesis and what are anomalies in the efficient market hypothesis?

A: Efficient market hypothesis is hypothesis explain the pricing in the market of equity and market…

Q: “When the stock market rises, investment spending isincreasing.” Is this statement true, false, or…

A: When the stock market rises, investment spending isincreasing. false

Q: Do you think investors can earn abnormal returns in financial markets that are at least semi…

A: Semi strong efficiency is a situation where all the public information about the stock prices is…

Q: What are the TRIN Statistics and Cofidence Index and what do their values describe about the bullish…

A: The Trading Index is also known as Arms index. The name Arm’s index is decided on the name of the…

Q: A greater Beta suggests investors will require a ________return.

A: Relationship between return and beta are direct. if a stock beta is higher, return expected also…

Q: Assume all firms have the same expected dividends. If they have different expected returns, how will…

A: All the firms have same expected dividends but different expected returns.

Q: How to calculate selling price, markups, markdown, stockturn rate, and return on investment.

A: Financial Ratio: A financial ratio, or bookkeeping proportion, is the general size of two chosen…

Q: . What effect does increasing inflation expectations have on the required returns of investors in…

A: Interest refers to the amount charged by the lender on the lent amount. The borrower of the loan is…

Q: Which of the following statements is correct? With all else held constant, a firm will have a…

A: The P/E ratio is based on price and earning. Any news about an increase in return on equity will…

Q: A low P/B ratio implies that the market expects low future growth in earnings. True OR False PLEASE…

A: Price-to-book ratio (P/B ratio): It is a method of comparing a company's market capitalization with…

Q: If you believe market prices can be predicted by solely studying past prices, then you believe the…

A: Weak form of efficiency Market Hypothesis claims that the stock prices may represent the all the…

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.