Regular Payment Length of Payment Interval Compounding Period Nominal Term of an Rate Annuity FA 1 3,00 End of each Annually 8% 5 years month 12,000 End of each Quarterly quarter 4,500 End of each Six months FA 2 2% 5 years FA 3 Monthly 3% 5 years
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.
Suppose you would like to invest your money for your future. You have three
choices of funding agencies namely, FA 1, FA 2, and FA 3. Based on the given
data below, compute for the future interest of each funding agency. What would you choose? Explain your answer.
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