| Definition of 'Systematic Risk'The risk inherent to the entire market or an entire market segment. Systematic risk, also known as “undiversifiable risk,” “volatility” or “market risk,” affects the overall market, not just a particular stock or industry. This type of risk is both unpredictable and impossible to completely avoid. It cannot be mitigated through diversification, only through hedging or by using the right asset allocation strategy. | | Investopedia explains 'Systematic Risk'For example
Words: 856 - Pages: 4
Is the placement of the products going to influence their price? Minjun Yu ECON 4980 Introduction In today’s commodity economy, it is no longer only about manufacturing, transportation, cost, profit, supply, demand, etc. There are many other factors that matters in the sales of the commodity. For many years, retailers have been searching for methods to help them identify ways to improve their merchandise presentation (Ron Larson).One of the methods that retailers used to improve the sales is
Words: 4244 - Pages: 17
Consolidated: Rd=4.98%+1.62%=5.6% Exploration & Production: Rd=4.98%+1.60%=6.58% Refining & Marketing: Rd=4.98%+1.80%=6.78% Petrochemicals: Rd=4.98%+1.35%=6.33% Cost of Equity To calculate the cost of equity, we use the Capital Asset Pricing Model. Rf stands for the risk-free rate of return, B is a measure of systematic risk, and EMRP denotes the equity market risk premium. For EMRP, Midland adopted the estimate of 5.0%. We assume the Beta for Exploration & Production and Refining
Words: 380 - Pages: 2
industry -- Smart Telecom (a wholly owned subsidiary of PLDT Co.), Globe Telecom and Sun Cellular, Inc. (a wholly owned subsidiary of Digitel). The nature of the industry in which TM operates is discussed in the following Porter’s Five Forces Model. Buyer Power • Mobile subscribers have high bargaining power. • They can easily influence players to force down prices (e.g. lower bucket offers, unlimited voice/SMS
Words: 1246 - Pages: 5
BAYER AG A Financial Analysis Executive Summary This paper tries to analyse the financial strength of Bayer AG and the other aspects associated with its capital structure and dividend policy. The organisation has been trying to change its financial structure to a management-driven one. This is evident from the reduction in the share capital of the organisation and the rise of debt capital, which it has been using efficiently to reduce its tax burden and control the overall
Words: 4253 - Pages: 18
their money, they expect to earn a return commensurate with the risk of that project or firm. Therefore, at a minimum the firm must earn at least the Expected Return, E(R), that investors require. So the E(R) from the Capital Asset Pricing Model (CAPM) (and similar models) becomes the minimum rate that the firm must earn to satisfy investors and this rate becomes one component of the relevant discount rate used in capital budgeting decisions. Computing the Cost of Capital for Each Component Cost
Words: 1092 - Pages: 5
- An Analysis of Select Companies I INTRODUCTION During the past three decades, CAPM (Capital Asset Pricing Model) has been studied in great depth and is used as the standard risk-return model by various researchers and academicians. The basic premise of CAPM is that the stocks with a higher beta yield higher returns for the investors. One of the conditions stipulated in the model is that the said return should be higher than the return of the risk-free asset. But, if the market return
Words: 4615 - Pages: 19
Consolidated: Rd=4.98%+1.62%=5.6% Exploration & Production: Rd=4.98%+1.60%=6.58% Refining & Marketing: Rd=4.98%+1.80%=6.78% Petrochemicals: Rd=4.98%+1.35%=6.33% Cost of Equity To calculate the cost of equity, we use the Capital Asset Pricing Model. Rf stands for the risk-free rate of return, B is a measure of systematic risk, and EMRP denotes the equity market risk premium. For EMRP, Midland adopted the estimate of 5.0%. We assume the Beta for Exploration & Production and Refining &
Words: 359 - Pages: 2
CHAPTER 8 AN INTRODUCTION TO ASSET PRICING MODELS Answers to Questions 1. It can be shown that the expected return function is a weighted average of the individual returns. In addition, it is shown that combining any portfolio with the risk-free asset, that the standard deviation of the combination is only a function of the weight for the risky asset portfolio. Therefore, since both the expected return and the variance are simple weighted averages, the combination will lie along a straight
Words: 4239 - Pages: 17
Mobile USA: Pricing for the Very First Time” Marketing II – BUSI2202U Group 40, Tuesday Session Word Count: Paper 2,912, Appendix 345 Problem Definition The unimpressive performance numbers in the market belonging to Virgin Mobile are mainly due to the lack of an attractive pricing strategy that would appeal to the target market group. The target market group (consumers aged 19 to 25) have different characteristics than other market groups and Virgin Mobile’s current pricing strategy is
Words: 3467 - Pages: 14