The ___ the expected return from a financial asset, the ____ the risk of not getting the money back from that financial asset.

Q: How is the value of an asset determined by predicted future cash flows?

A: The Answer

Q: How do you evaluate an asset whose value is predicated on future cash flows?

A: Assets are the resources that are generally used for the purpose of revenue generation by the…

Q: Companies invest in short term investments for safekeeping purposes. Right O Wrong

A: Short-term investments, otherwise called marketable securities or transitory ventures, are those…

Q: do liquid assets frequently have lower rates of return than fixed assets?

A: Liquid assets are the cash or cash equivalents which can be drained out frequently whereas fixed…

Q: What is the causes of the financial risk?

A: financial risk - financial risk is the possible danger of losing money from an investment made by…

Q: What are the real risks of an adverse financial outcome, especially in the short run?

A: Risk is the important factor of investment decisions to explain the capability of an investor to…

Q: Which of these best explains fixed assets? Select one: a. Are of long life and are not purchased for…

A: Assets are the resources owned by an entity. These are usually of two kinds; Current and Fixed.

Q: Is the value of money affected by time, and if it is, in which direction? O a. It is not affected O…

A: The value of time of money is the idea that the money currently available is worth more than the…

Q: Keeping your funds in liquid assets is riskier than keeping them in liquid assets and therefore…

A: Liquid assets are those assets that can be quickly converted into cash, hence are considered to be…

Q: The net present value: is equal to the initial investment when the internal rate of return is equal…

A: The net present value is determined by, The Net present value (NPV) is defined as the difference…

Q: Which of the following statements are true regarding the payback period of an investment? It does…

A: Answer: The correct option is (4) All of the above.

Q: How do investors account for risk when determining an asset’s value?

A: Asset valuation helps to determine the fair value of the asset. Various asset valuation models such…

Q: Future value refers to the worth today of some amount of money received in the future. O True False

A: Future value is defined as a technique for computing how much the present value of PV of a asset or…

Q: The principal of the time value of money is probably the single most important concept in financial…

A: Note: This post has multiple questions. The third cannot be answered because the timelines have not…

Q: 1. changing market interest rates will change the market value of assets change the market value of…

A: A change in interest rate in the economy has a major impact on the balance sheet of the firm and…

Q: Too much investment in current assets reduces firm profitability, whereas too little investment in…

A: Too much investment in current assets reduces firm profitability: The firm that invests more in…

Q: ow do you think today's low interest rate environment is impacting the time value of money? How…

A: Time Value of Money: It refers to the concept which tells the value of money is worth more than in…

Q: Discuss why it is advisable to invest in a group of financial assets rather than investing in just…

A: An investment is refer as an asset purchased with intention to earn income at some time in future.…

Q: Why doesn’t an estimated absolute covariance number tell the investor much about the relationship…

A: Sample Covariance means the in which the investor has not much information about the rate of return…

Q: A reasonable probability that an investment will produce a loss a. risk b. value c. specualtion…

A: There are several investment styles through which one can generate profits or build wealth.

Q: Rational investors prefer to receive money today rather than the same amount of money in the future.…

A: The Time Value of Money is an important concept for investors because a dollar on hand today is…

Q: Explain the problems posed for the use of the IRR when it is necessary (i) to choose between two…

A: IRR or Internal rate of return is the annualized rate of return for an project with expected cash…

Q: Calculate the present value and future value of an uneven cash flow stream.

A: A stream of cash flow is uneven  when all the amounts in the series of cash flows are unequal .i.e.,…

Q: The average duration of its assets is longer than that of its liabilities.   There is a…

A: Risk is the uncertainty associated with an investment. Higher the risk more is the return and lower…

Q: g. The amount of money today that is consider equivalent to the cash flows expected to take place in…

A: Capital budgeting is the process of making decisions in long term assets. It is the process of…

Q: Advantages and Disadvantages of Saving in Investments

A: Financial investments are made with the future desire of making just financial returns as far as…

Q: Explain how sunk costs and cannibalisation affect the determination of an investment’s incremental…

A: Introduction : . Simply put, sunk costs refers to the costs that has already been incurred and the…

Q: Liquidity’ in financial terms is: A. a feature of money only B. the best measure of risk of a…

A: Liquidity alludes to the ease in which, regardless of impacting its market rate, a property, or…

Q: . Can an effective asset allocation strategy assist in overcoming the fear of investing

A: Note : As per the guidelines, only first question will be answered. Kindly post the remaining parts…

Q: Which of the following methods does not adjust for the time value of money: A internal rate of…

A: Capital Budgeting is a financial analysis technique which is used to evaluate the profitability of…

Q: Why is the fixed asset riskier than current asset?

A: In financial accounting, the company's financial statements assets are classified into two…

Q: How to deal with financial risk

A: Financial risk is always present in business situations but one thing we can do it that we can…

Q: The basic principle of valuation states that the value of any asset is: O The sum of the present…

A: The present value of an asset is the sum of all future cash flows discounted at the discount rate.

Q: any risk attached to a financial asset should not be considered when making an investment decision…

A: Financial asset A financial asset is referred to as a liquid asset that features stocks, bonds, bank…

Q: Why do the payback period analysis fail to recognize the difference between the present and future…

A: Pay-Back (PB) Period is time in which Initial outlay related to proposed investment is completely…

Q: What is the cost of accrued liabilities? If accruals have such a low cost, why don’tfirms use them…

A: An accrued liability refers to an expense a business has incurred during a specific period but has…

Q: When a capital investment is expected to provide unequal annual cash inflows, the payback period…

A: Payback period: It can be defined as the time that investment takes before it starts generating…

Q: What are the three sources, the owner of a risky asset should expect to earn a return from?

A: An asset which does not provide fixed rate of return is known as risky asset. The returns provided…

Q: How is the value of any asset whose value is based on expected future cash flows determined?

A: Answer: When there is a sequence of expected future cash flows, cash flow method is one of the best…

Q: Lowering the discount rate on a cash flow will its present value.

A: Discount Rate: It is the rate at which the cash flows over the period are discounted.

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.