What is a stock’s volatility?

Q: what is the return of stock a what is the return of stockb what is the standard deviation on stock…

A: Given: tate Probability(P) Return A Return B Poor 40% -0.08 -0.15 Normal 35% 0.19 0.14 Good…

Q: What is money market preferred stock?

A: Preferred stock: The stock that is entitled to have priority over other common stock and with fixed…

Q: Why does the dilutive effect of stock options called the treasury stock method?

A: Treasury Stock Method: In this method, a company that receives exercised amount on the outstanding…

Q: What’s the difference between a stock’s current market price and its intrinsic value?

A: Stock Current market price is the price at which the stock traded in the market.   Intrinsic value…

Q: What are the two components of most stocks’ expected total return?

A: Expected total return refers to the full return of an investment over a certain period of time.

Q: How can you chart and predict falling or rising wedges for stocks?

A: Short-term, medium-term, and long-term trends: Stock Prices move either upwards, downwards, or…

Q: What stock valuation models are available?

A: The stock valuation models as follows: Absolute valuation: This method mostly emphases on finding…

Q: Why might the stock price changing make sense within the context of risk and return?

A: Stock price movement is dependent on various factors which would eventually impact the required rate…

Q: How does a stock price play a role in ROA or ROE

A: Return on Equity (ROE) is the ratio which defines the company’s efficiency to utilize investors…

Q: what would be the stock price?

A: Current stock price refers to the present value of the share based on the future expected payoffs.…

Q: Indicate factors influencing the market price of a stock. Explain how changes in the factors will…

A: There can be many factors affecting the stock price, for example, the growth rate, the required…

Q: Explain why common stock is itself like a call option. What plays the role of the exercise price and…

A: There are two types of options in the market: call options and put options.  Call options allow the…

Q: What is the difference between cumulative and noncumulative preferred stock?

A: Cumulative preference shares:   Under a cumulative preference share, if the dividend payments have…

Q: What is risk aversion, and how is risk aversion related to the expected return on a stock

A: In the world of investment, the risk appetite of the investor is an important consideration when…

Q: Explain required rate of return on stock

A: The required rate of return is the minimum acceptable rate of return that an investor expects to…

Q: Calculate the expected return for Stock A.

A: Expected Return: It represents the profit or loss expected by an investor on an investment. It is…

Q: What are the benefits of stocks

A: A stock means the small units of the company which is issued by the company to investors. A company…

Q: Explain realized rate of return on stock

A: Realized Rate of Return on stock gives you the percentage return on holding the stock for a certain…

Q: What is meant by par value, and what is its significance to stockholders?

A: Par Value Par value is also known as face value. Par value is the value which is mention on the…

Q: How GARCH (generalized ARCH model) model is applied to Stock Price Volatility?

A: GARCH model is one of the models that is usually used by the financial analysts. The financial…

Q: The return of stock B is __% The volatility of stock A is __% The volatility of stock B is __%

A: Thank you for posting questions. Since you have posted multiple questions, as per the guideline I am…

Q: Higher a stock’s volatility, why does the higher the probability of large increases or decreases in…

A: Stock Volatility:   Volatility is defined as a statistical measure of the dispersion of the returns…

Q: What is preferred stock?

A: These are stocks which give their owners certain preferential rights. The owners of these stock…

Q: What are the arithmetic and geometric returns for the stock?

A: Arithmetic and Geometric mean are used to calculate the expected mean of the stock Arithmetic Mean…

Q: What effect does Standard Deviation of Stock returns have on call option price?

A: Standard Deviation of Stock Returns:The standard deviation of stock returns represent how much…

Q: What is the expected return on the firms stock

A: Here, Proportion of Debt is 75% Proportion of Equity will be (1-75%) = 25% Cost of Debt is 5% Risk…

Q: What is the Treasury stock? Give an example?

A: Stockholders’ Equity Section: It is referred to the section of the balance sheet that shows the…

Q: What is current stock price?

A: Stock means equity part of the company. Companies’ capital structure may contain debt, equity, and…

Q: What effect does Stock Price have on call option price?

A: Call options are contract which gives the buyer the right but not the obligation to buy the…

Q: What is the expected return for stock A?

A: Expected Return: It is computed by the sum of individual returns proportionately weighted by each…

Q: How to know what price target to buy a stock?

A: A price target is an analyst's forecast for the future value of a commodity. Price targets can apply…

Q: What will be the current stock price?

A: The current price of a stock is the most recent selling price of a stock in the market. It is the…

Q: What is the Security Market Line (SML)? How isbeta related to a stock’s required rate of return?

A: Security market line (SML): It could be a line drawn on a graph that works as a graphical…

Q: In Shiller’s terminology, what are ex post stock prices?

A: The intrinsic value of the stock could be higher or lower. The stock investor's purpose is to find…

Q: Is treasury stock an asset? explain.

A: Treasury Stock: It refers to the shares that are reacquired by the corporation that are already…

Q: What is treasury stock?

A: Ownership of an organization can be broken down into small parts or units also known as Shares.…

Q: What is margin requirement (for stock)?

A: While trading for the investments in the stock market, there are two methods through which investors…

Q: How would you use these to evaluate whether or not a current stock price is perhaps to high…

A: The term stock price refers to the current market price of a share of stock, and every…

Q: hat is the relationship between the expected return of a stock and its fair expected return? When is…

A: Step 1   The anticipated return is the profit or loss that an investor expects from a known…

Q: What are some analyzes we can do to predict which stock will go up?

A: Stock price movement is primarily speculative in the short term (two to three months). The price…

Q: uss whether the stock pric n in the stock market.

A: Efficient Market Hypothesis -:An significant debate in investors is whether the stock market is…

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.