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What are the three sources, the owner of a risky asset should expect to earn a return from?
An asset which does not provide fixed rate of return is known as risky asset. The returns provided by risky asset is more than the return provided by the risk-free asset. The amount of premium depends on the degree of risk.
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- What are the three factors that the expected return on any risky asset is composed of?How do investors account for risk when determining an asset’s value?Describe the principles of asset valuation. Distinguish between the required rate of return and expected rate of return. Based on the asset valuation, how do the investors make investment decisions using the required rate of return?
- In a few sentences, answer the following question as completely as you can. According to the CAPM, the expected return on a risky asset depends on three components. Describe each component, and explain the role of each one in determining expected return.Explore the implications of short-selling and the inclusion of a risk-free asset.A reasonable probability that an investment will produce a loss a. risk b. value c. specualtion d. capital gain
- The ___ the expected return from a financial asset, the ____ the risk of not getting the money back from that financial asset.Which of the following statements describing the elements of intrinsic valuation is most accurate? A.) When the present value of the cashflows is discounted with the appropriate rate and this present value is positive, then the asset providing these cashflows has a value to the investor. B.) The risk-free rate is the lowest rate that an investor can earn from short-term investments. C.) Cashflows may include depreciation expenses and amortization costs. D.) A simple calculation of present values of expected cashflows of different investments using the risk free rate would be enough to determine which asset is best.Discuss the risks associated with short selling an asset. Use examples and empirical evidence in your answer.
- When adding a risky asset to a portfolio of may risky assets, which property of the asset has a greater influence on risk: its standard deviation or its covariance with other assets? ExplainWhich of the following are the key factors when determining asset allocation for an investment? I. Time an investor has until he needs to use the money from the investment (time horizon) II. Risk preferences (tolerance for risk) III. Current financial situation a. I., II., & III. b. I. & III. c. II. & III. d. I. & II.Which of the following types of factoring is riskier for the buyer of the invoice? Recourse factoring Non-recourse factoring They have the same risk It depends on how many assets the company acquiring the resource has Give typing answer with explanation and conclusion
