Let's say that financial investors, who at least potentially are interested in buying stocks about market conditions. Their fear is such that it would take pretty significant returns to buy stocks. From what we learned in lecture, we know that this will tend to drive stock prices up because the risk-free interest rate will rise down because dividends will rise O down because dividends will fall down because the risk premium will rise
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- Q1: Respond to each of the following comments: If stock prices follow a random walk, then capital markets are little different from a casino. A good part of a company’s future prospects is predictable. Given the ace, stock prices cannot possibly follow a random walk. If markets are efficient, you might as well select your portfolio by throwing darts at the stock listings in the The Wall Street Journal.1. If a company has a Beta = 1.7, this stock is riskier than the S&P 500 index. That means its price fluctuates more than the market average. We can also say that the company’s stock price is more volatile than average. What’s good about a Beta > 1 and what’s bad about it? 2. T or F? Higher risk investments give the investor a higher return. If this is true, why don’t we all invest in the riskiest investments we can find? What’s the difference between fundamental analysis and technical analysis? Don’t simply define them both. Figure out what’s different. 3. If the value > price, then BUY according to value investors If the value < price, the DON’T BUY or maybe sell or hold according to value investors Would “momentum” investors say Buy or Don’t Buy? What would “income investors” want to know in order to make a BUY decision?H5. Dan has heard that his required investing knowledge is redced due to the efficient market hypothesis. which of the following is not an implication he can rely on? a) stocks are fairly valued overtime b) technical analysis will not help him choose better c) his best strategy is to buy and hold d) the odd hot tip can help him beat the market from time to time
- Q : The pandemic issue due to covid19 has brought many economic at lower ebb.It has created impact on financial and non-financial markets.But the Economists are quite hopeful about economic recovery and their estimations are a kind of hope for all investors.Mr . Akhan is quite hopeful about stock market recovery hence he plans to invest 20 percent of his wealth in stock market.With assistance of team he has finalized to choose one of the following options.kindly help him in making decision: PSP - Stock Company is currently undergoing expansion and is not expected to change its cash dividend for the next 4 years the last dividend paid was PKR 3. Having completed expansion targets, higher earnings are expected to result causing a 30% increase in dividends each year for 3 years. After these three years of 30% growth, the dividend growth rate is expected to be 2% per year forever. Nestle Pakistan - Stock Company has reputation of having stable dividend policy. Company shall pay…b) It is often understood that investing in stocks appearing on the OTC – Pink sheets is very risky. Why doyou think this is so? Briefly explain the reasons. (50 – 60 words)(a)Jack is considering investing in the stocks. The two stocks are available with the following particulars: Stock Return %Beta Marvel 9.60.75DC8.71.3 As measured by the return on government stock, a risk-free return in the market is 3.6%.Using capital asset pricing model, Calculate: (i) The rate of return of stock Marvel (Ii) The rate of return of stock DC (iii) Which stock should Jack invest in and why? (b) Explain the advantages and limitations of capital asset pricing model (This is subpart question nor multiple questions) so I humble request please answer I give up thumb
- Question 1 We understand standard deviation of returns as a measure of risk and rational investors would like to minimize risk. Notwithstanding this, you may have read that as the standard deviation of returns of the underlying asset increases the value of an option rises. If standard deviation is a measure of risk and investors do not particularly like it, why does it lead to an increase in an option's value? Question 2 Assume that you have some shares of stock in ABC Inc. Why do we say that if you also purchase a put option on the same stock, the price paid to buy the put option is like paying an insurance premium?Question: You are an investment advisor. You currently own two stocks, A and B, with the following characteristics: Expected Return Beta X 10% 0.8 Y 16% 1.5 The current risk-free rate is 2 percent, and the expected return on the market is 12 percent. How would you change your holdings of the two stocks (i.e., for each, would you sell or buy more)? Show your calculations (and explain). Stock A: Stock B:A4 6 a Suppose we observe two stocks with the following characteristics: Stock Expected return Beta K 20% 1.6 L 12% 0.9 a. An asset is said to be overvalued if its price is too high given its expected return and risk. The risk-free rate is currently 6%. Is one of the two stocks overvalued relative to the other? Explain your answer fully (i.e., provide reasons why you think the stock is or is not overvalued).
- QUESTION Answer the questions below using the following information on stocks A, B, and C. A B C Expected Return 20% 21% 10% Standard Deviation 12% 10% 10% Beta 1.8 2.2 0.8 Assume the risk-free rate of return is 3% and the expected market return is 12% Calculate the required return for stocks A, B, and C. Assuming an investor with a well-diversified portfolio, which stock would the investor want to add to his portfolio? Assuming an investor who will invest all of his money into one security, which stock will the investor choose?8. An investor currently owns a portfolio of stocks and expects that the stock market to fall next quarter. How does the investor hedge risk without selling the portfolio?Answer the following questions: A. Explain why the price of many individual stocks still goes down, even when the overall stock market goes up. b. How can you avoid the value of your stock from going down?