Description
Principles of Finance I
Prepare a PowerPoint or Prezi Presentation to define the following terms, using graphs or equations to illustrate your answers where feasible.
- Risk in general; stand-alone risk; probability distribution and its relation to risk
- Expected rate of return, ^r
- Continuous probability distribution
- Standard deviation, σ; variance, σ2
- Risk aversion; realized rate of return, r
- Risk premium for Stock i, RPi; market risk premium, RPM
- Capital Asset Pricing Model (CAPM)
- Expected return on a portfolio, r^p; market portfolio
- Correlation as a concept; correlation coefficient, ρ
- Market risk; diversifiable risk; relevant risk
- Beta coefficient, b; average stock’s beta
- Security Market Line (SML); SML equation
- Slope of SML and its relationship to risk aversion
- Equilibrium; Efficient Markets Hypothesis (EMH); three forms of EMH
- Fama-French three-factor model
- Behavioral finance; herding; anchoring
Business School Assignment Instructions
The requirements below must be met for your paper to be accepted and graded:
Write between 750 – 1,250 words (approximately 3 – 5 pages) using Microsoft Word in APA style, see example below.
Use font size 12 and 1” margins.
Include cover page and reference page.
At least 80% of your paper must be original content/writing.
No more than 20% of your content/information may come from references.
Use at least three references from outside the course material; one reference must be from EBSCOhost. Text book, lectures, and other materials in the course may be used, but are not counted toward the three reference requirement.
Cite all reference material (data, dates, graphs, quotes, paraphrased words, values, etc.) in the paper and list on a reference page in APA style.
References must come from sources such as scholarly journals found in EBSCOhost or on Google Scholar, government websites and publications, reputable news media (e.g. CNN , The Wall Street Journal, The New York Times) websites and publications, etc. Sources such as Wikis, Yahoo Answers, eHow, blogs, etc. are not acceptable for academic writing.
Explanation & Answer
Attached.
Running head: PRINCIPLES OF FINANCE
Principles of Finance
Student’s Name:
Institutional Affiliation:
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PRINCIPLES OF FINANCE
STAND ALONE RISK
Remain solitary hazard is just a piece of aggregate hazard and relates to the hazard a speculator
takes by holding just a single resource. Hazard is the possibility that some horrible occasion will
happen. For example, the danger of an advantage is basically the possibility that the benefit's
money streams will be ominous or not as much as anticipated. A likelihood circulation is a
posting, outline or chart of every single conceivable result, for example, expected rates of return,
with a likelihood relegated to every result. A continuous probability distribution contains an
infinite number of outcomes.
EXPECTED RATE OF RETURN
Expected return is the measure of benefit or misfortune a financial specialist suspects on a
venture that has different known or expected rates of return. It is ascertained by increasing
potential results by the odds of them happening, and summing these outcomes. The normal
return doesn't simply apply to single ventures. It can likewise be broke down for a portfolio
containing numerous speculations. On the off chance that the normal return for every speculation
is known, the portfolio's general expected return is basically a weighted normal of the normal
returns of its segments. Rate of return is calculated using the following formula;
S
E( Ri ) = p(s) * R(s )i
s=1
Where p(s) denotes the probability of state s, R(s) denotes
return in state s.
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PRINCIPLES OF FINANCE
CONTINUOUS PROBABILITY DISTRIBUTION
There two type...
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