capital, the expected excess market return is equal to the: a. return on the stock minus the risk-free rate. b. difference between the return on the market and the risk-free rate. c. beta times the market risk premium. d. beta times the risk-free rate. e. market rate of return. Difficulty level: Easy CHARACTERISTIC LINE c 3. The best fit line of a pairwise plot of the returns of the security against the market index returns is called the:
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Pricing Theory (APT)? Which model is appropriate for calculating a stock's required rate of return? What is the Securities Market Line and which of the above models is it a product of? Capital Asset Pricing Model and Arbitrage Pricing Theory both stress on the fact that expected return depends on risk originating from economic influence and is not affected by the unique risk. Market portfolio has a great importance in the CAPM but it does not feature in the APT. APT does not speak about the underlying
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truth to that rumour after all.’ 1 1 Janet Lowe, The Rediscovered Benjamin Graham: Selected Writings of the Wall Street Legend, Wiley, 1999. I|Page Dedication This dissertation is dedicated to all those people who provided moral and financial support along with particular insight into the weird and wonderful world that is investing. Particular thanks to: Van Der Spuy Brink Tom de Lange Konrad von Leipzig Reenen Muller Henk Snyman The Three Office Stooges II | P a g e Declaration
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liberalization, de-regulation, privatisation, and facilitation being its foremost cornerstones. Reason - 5: Financial Markets The capital markets are being modernized, and reforms have resulted in development of improved infrastructure in the stock exchanges of the country. The Securities and Exchange Commission of Pakistan has improved the regulatory environment of the stock exchanges, corporate bond market and the leasing sector. Whilst the Federal Board of Revenue has facilitated structural reform in
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use of fair value rules. As the following pages reveal, it can be reasonably contended that: • At present, the global financial system does not embody a common set of accounting standards governing fair value measurement of assets and liabilities. The two critically important accounting systems – U.S. GAAP (generally accepted accounting principles) and IFRS (international financial reporting standards)
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Vol.6, No.6 (Serial No.61) Journal of Modern Accounting and Auditing, ISSN 1548-6583, USA Fair value accounting under financial crisis HE Cai-xia1, ZHANG Chi2 (1. School of Accounting, Zhongnan University of Economics and Law, Wuhan 430073, China; 2. School of Management, Huazhong University of Science and Technology, Wuhan 430073, China) Abstract: The recent financial crisis has led to a vigorous debate about the pros and cons of fair-value accounting (FVA). This debate presents a major
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Understanding Financial Concepts – Assignment I 1. Explain why market prices are useful to a financial manager Managers are interested in market prices for reasons better explain by market of economic theory. The classic market of economic theory is a call auction market where all market participants meet in one place at one time to arrive at a market clearing price through open outcry of bids and offers. In agricultural societies, these markets were often held annually, at harvest time, but
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1. MNCs have investment or financial operations in more than one country. ANS: True. 2. Because of globalization in the world’s markets, a multinational financial manager is more likely than a domestic financial manager to specialize in finance to the exclusion of other fields of business. ANS: False. The multinational financial manager must be well versed in each of the business disciplines in which the MNC is involved. 3. The domestic financial manager must be knowledgeable
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Theory Primary vs Secondary Market The primary market is direct from the company issuing the stock or bond to the buyer. The secondary market is after the initial public offering, people buy and sell on the stock exchange, NASDAQ or over the counter market or the pink sheets. For example, IBM issues some new stock. Someone buys it (usually an underwriter, but maybe the public). Assuming IBM sells direct to the public and I buy it for $50 and it goes up to $ 60 and you want to buy it and I want to
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Chapter 5 Financial System of Malaysia 5.1 Financial System Structure in Malaysia The Malaysian financial system is structured into two major categories, Financial Institutions and Financial Market. The Financial Institutions comprise Banking System and Non-bank Financial Intermediaries. The Financial Market in Malaysia comprises four major markets namely: Money & Foreign Exchange Market, Capital Market, Derivatives Market, and Offshore Market. Chart 1: The Financial System Structure in
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