Preliminaries • A. Required (rate of) Return versus Cost of Capital • Cost of capital - required return - appropriate discount rate all denote the same opportunity cost of using capital in one way as opposed to an alternative investment in the financial market having the same systematic risk. – required return: is from an investor's point of view – cost of capital: is the same return from the firm's point of view – appropriate discount rate: is the same return yet again to be used in a present value
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ranges from 30 to 270 days) And investors can buy these at discounted prices for short term investment. Treasury bills are the debt raised by the U.S. government. T-bills are considered the safest investment options and have the minimum interest-rate risk. They are again very short-term maturities. CDs (Certificates of Deposit) is another vehicle for investment which offers a higher rate of interest than regular savings account. CDs are issued by corporates to raise funds for fixed period of time. The
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Strategic Asset Allocation: Determining the Optimal Portfolio with Ten Asset Classes Niels Bekkers Mars The Netherlands Ronald Q. Doeswijk* Robeco The Netherlands Trevin W. Lam Rabobank The Netherlands October 2009 Abstract This study explores which asset classes add value to a traditional portfolio of stocks, bonds and cash. Next, we determine the optimal weights of all asset classes in the optimal portfolio. This study adds to the literature by distinguishing ten different investment
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instrument's current yield, etc. The weights are based on the target market values of the relevant components. But if no market values are available we base the weights on book values. Cost of Preferred Stock Cost of preferred stock is the rate of return required by the holders of a company's preferred stock. It is calculated by dividing the annual dividend payment on the preferred stock by the preferred stock's current market price. In finance, the value of any asset equals the present value of
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contest to ‘hedge’ your position. In finance there are numerous strategies used, a number of which I will explain later. The goal of a hedge fund is to generate positive returns no matter what the market does. A hedge fund can be described as an “actively managed private investment fund that seeks positive attractive returns”. Frush, Scott. (2006). Understanding Hedge Funds. Ann Logue differentiates them from other investment tools, “They differ from so called ‘real money’ traditional investment
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Vol. 4, No. 5 International Journal of Business and Management An Analysis of Investor’s Risk Perception towards Mutual Funds Services Nidhi Walia (Corresponding author) Lecturer, School of Management & Social Sciences, Thapar University Patiala, India E-mail: nwalia@thapar.edu Dr. Mrs. Ravi Kiran School of Management & Social Sciences, Thapar University Patiala, India E-mail: rkiran@thapar.edu Abstract Financial markets are constantly becoming more efficient by providing more promising
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invest a small proportion of equity funds in it. In order to select a more appropriate investment target, the following issues should be taken into consideration by Sharpe: 1) What are the risk-return characteristics of each stock 2) What are the impacts of either stock to the overall risk-return profiles of the equity portfolio Analysis: 1. Suppose Sharpe's position had been 99 percent of equity funds invested in the S&P500 and either one percent in Reynolds or one percent in Hasbro
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Ch 13 dq 1. If corporate managers are risk-averse, does this mean they will not take risks? Explain. Risk averse corporate managers are not unwilling to take risks, but will require a higher return from risky investments. There must be a premium or additional compensation for risk taking. 3. When is the coefficient of variation a better measure of risk than the standard deviation? The standard deviation is an absolute measure of dispersion while the coefficient of variation is a relative
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get an Expected Return of 6.25%: 4.75% + 3% - 1.5% = 6.25% Q2. The Policy Portfolio is the “neutral” guide of long-term asset allocation set by the HMC board and it serves as a benchmark of actual performance and as a metric against which compensation of portfolio managers is measured. The aim of the Policy Portfolio is to provide targets for different asset categories as a percentage of the total portfolio, in order to achieve a long-term expected return with the least risk possible. The policy
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1 LIQUIDITY RISK MANAGEMENT: A COMPARATIVE STUDY BETWEEN CONVENTIONAL AND ISLAMIC BANKS OF BANGLADESH Banks conventionally fulfill the supreme responsibility of being a financial intermediary between the deficit and surplus unit of the economy. Liquidity risk refers to the excessive transaction cost, excessive loss of value and excessive exertion of time that banks have to face at the time of allocating liquidity to the third party when stipulated. Because of the unique constitutional features
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