What is Long-Term Equity AnticiPation Security (LEAPS)?

Q: Assume that the risk-free rate increases, but the market risk premium remains constant. What impact…

A: Risk free rate is free from the risk. Every rate of return given is depends on the risk free rate.

Q: What are some of the risks involved in short-term vs. long-term financing ?

A: Financing refers to providing or borrowing capital so as to run the operations of the business…

Q: What is the market risk premium (rM - rRF)?

A: The market risk premium can be found using the CAPM Model As per CAPM Model, expected return = Risk…

Q: What does vega measure? What can you tell from vega value? Can the vega of a derivatives portfolio…

A: Option gives right to buy or sell an underlying asset to the buyer of the option at strike price. A…

Q: What is maturity matching approach (for short-term financing)?

A: This approach states that the maturity of company’s assets and liabilities should be coordinated to…

Q: Define the term Return on common equity?

A:

Q: How does the emergence of interest-rate risk helpexplain financial innovation?

A: Interest rate risk is defined as the risk that is faced by the bond holders because of the changing…

Q: Explain Interest Rates and Inflation Expectation?

A: An interest rate is the measure of cash a bank or creditor charges for right of entry to cash. The…

Q: How can we measure the return on common equity?

A: The return on equity is the percentage earned on the equity investment made by the company. It shows…

Q: How does risk affect interest rates?

A: The risk and the interest rates are in a direct relationship that is, the greater the risk the…

Q: What does maturity matching mean, and what is the advantage of this financingpolicy?

A: Maturity matching or hedging approach: It is a working capital financing system where we fund short…

Q: What security provides a good estimate of the short-term nominalrisk-free rate?

A: T-bills are the treasury bills issued by the government. These bills are risk-free and the rate of…

Q: How do derivatives hedge risk?

A:

Q: What is equity security?

A: Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from…

Q: Is the risk-free rate the Treasury yield?

A: The risk-free rate refers to the rate of return on an investment that is having zero risk of loss.…

Q: What security provides a good estimate of the long-term nominalrisk-free rate?

A: Risk-free Rate is the estimation of the rate that is earned on the securities or the investments…

Q: Explain Risk Premiums, Interest Rate Risk, and Default Risk?

A: Risk premium: A risk premium is nothing but the return above the risk-free rate of return that an…

Q: What is the Relationship between Changes in Interest Rates, Investor Returns, and “Going-In”Cap…

A: The question is based on the concept of relation between change in interest rate and its impact on…

Q: Describe two different ways one can short equity market volatility

A: An equity market Volatility is the rate at which the price of a stock increases or decreases over a…

Q: Explain risk-free nominal rate of interest rate

A: This is the raw rate of return which does not take inflation into consideration. This is the rate…

Q: What is duration gap model? Explain the concept of duration. How duration measure can be used to…

A: Duration gap measures the mismatch between the duration of assets and liabilities held by a…

Q: How are interest rate risk and reinvestment raterisk related to the maturity risk premium?

A: The maturity risk premium is the premium for the hazard created amid an asset's life by conceivable…

Q: determine the expected return for securities

A: Return on security is the difference in Value at the time of maturity and cost of investment. T-Bill…

Q: What is market risk premium?

A: Market risk premium is an additional return investor will receive for holding the additional risk in…

Q: What is the shape of the yield curve given the term structure below? What expectations are investors…

A: Yield Curve: The yield curve plots the different interest rates and maturities of bonds. It acts as…

Q: Explain risk-free interest rate (the nominal long-term rate)

A: The rate at which an additional amount that a borrower pays to the lender over the borrowing amount…

Q: Explain Interest Rates and Risk?

A: Interest Rate: Interest rate is the percentage of interest charge by a lender on his principal…

Q: /hy is yield to maturity more important than coupon rate when nmes to honds?

A: In bonds there are coupon payments paid each year and par value on the maturity of the bond.

Q: what is the nominal risk-free rate

A: T-bills also known as treasury bills. T- bills are government bonds or debt securities which are…

Q: Why we need tocalculate valuation of securities and yield to maturity of a security?

A: One of the important decisions that should be taken by the investor is to the valuation of security,…

Q: What is financial futures?

A: Financial futures are the contracts that are used for the selling and purchasing of different types…

Q: Explain the interest rate risk?

A: The amount charged by a lender to a borrower for any type of debt is referred to as an interest…

Q: What are equity carve-outs?

A: Introduction: Merger is defined as the mechanism in which the corporate unit, management and…

Q: What is equity risk premium?

A: The risk premium is the extra return an investor receives for taking market risk. We know that risk…

Q: WHAT IS THE EQUITY INVESTMENT?

A: Equity: Equity refers to that part of the company’s capital which is raised by issuing equity…

Q: What is the difference between lending and borrowed portfolio. How leverage can increase the…

A: The capital allocation line, also known as the capital market link, is a line drawn on a graph of…

Q: What is maturity risk premium (MRP)?

A: normally Maturity risk premium is the extra return that an investor will get for bearing the…

Q: What is short-term, highly liquid investments?

A: Investments:   Companies invest in stocks and bonds of other companies or governmental entity to…

Q: Explain current liabilities are riskier than long-term liabilities?

A: Liabilities:   A liability is a sum of money owed by the company towards external entities like a…

Q: What is a “liquidity premium?” When do investors increase their attention to such a premium?

A: LIQUIDITY PREMIUM A liquidity premium is an additional value that the investors demand when the…

Q: What is the importance of market risk premium?

A: Market risk premium Variance of the market return and the risk-free rate. It depicts the equity…

Q: explain short term trading strategy?

A: Short-term trading is a strategy in which trader aims to open and close their position of stock…