The difference between the expected return and the actual return is referred to as the unexpected gain or loss.  True or False?

Q: Distinguish the nominal rate of return from the real rate of return.

A:

Q: Which of the following is not an advantage of the average rate of return method? a.includes the…

A: Average rate of return is a method of calculating return on the asset

Q: Why do most assets of the same type show positive covariances of returns with each other?

A: Covariance is a way of measuring the directional relationship between the returns on two assets and…

Q: What is a satisfactory investment? When the present value of benefits exceeds the cost of an…

A: Satisfactory investment refers to an investment  wherein the present value of benefits after…

Q: What are the shortcomings of the internal rate of return criterion?

A: Solution- Internal Rate of Return (IRR)-      The Internal Rate of return (IRR) is that the discount…

Q: a. what is the difference between the discount rate used for net present value and the internal rate…

A: Discount rate used for net present value is rate which investor want to earn from a project . It is…

Q: Why are the net present value and the internal rate of return models superior to the payback period…

A: The net present value and internal rate of return techniques are superior to the payback method…

Q: What can be understood by abnormal return?

A: Note firstly we understand what is meaning of abnormal return. Basic meaning of abnormal return is…

Q: How did you decide whether the situation is a profit or a loss?

A: A profit and loss (P&L) statement is a financial statement that details the revenues,…

Q: How does an “opportunity cost”,  subtracting from the revenue of an alternate course of action,…

A: Opportunity cost: Opportunity cost is a loss of income from one alternative if another alternative…

Q: Should the analyses show the sensitivity of the discounted net present value and other outcomes?

A: The question is based on the concept of a sensitivity analysis, used as a analysis tool in capital…

Q: What is meant by the term abnormal rate of return?

A: Abnormal rate of return is return earned above or below the normal rate of return.

Q: What is the Internal-Rate-of-Return Criterion?

A: Internal rate of return (IRR): The internal rate of return (IRR) is a measure utilized in capital…

Q: difference between internal rate of return and net present value?

A: Difference between internal rate of return and net present value?

Q: The most accurate way to analyze the profitability of an investment is to compute the payback…

A: Payback period is the period for time taken of project to repay the initial investment. Payback…

Q: Calculating the payback time is the most precise technique to determine the profitability of an…

A: Payback technique helps us to compute the time period in which the project's cash inflows cover the…

Q: Which different terms are used to refer to rate of return?

A: Rate of return is the return that is expected by the investors from the investment made. It is…

Q: In general, what is true of people's risk aversion for changes in income that are marginal (i.e.,…

A: Risk Aversion: It is the propensity of individuals to favor results with low vulnerability to those…

Q: Identify two disadvantages of using the payback period for comparing investments.

A:

Q: When npv is negative, the discount rate is greater than the actual return on investment. A.…

A: Net present value is the method used in capital budgeting to analyse various investments, projects,…

Q: o you think a person would opt to use the Payback Period Method instead of the Net Present Value or…

A: Given information : . NPV refers to the difference between the sum of the present value of expected…

Q: What would be the expected change in profit?

A: "Contribution Margin: The Contribution Margin is also can be treated on a gross or per unit basis.…

Q: Make a simple example of the following: a. Capital Gain (or Losses) b. Expected Return c. Real…

A: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and…

Q: What are the different terms used to refer to the rate of return?

A: Rate of return is an expected profit on an investment by a investor. It is a rate at which investor…

Q: The interest rate is the IRR for the mixed investment. True or false?

A: Project Balance (PB) is the amount of investment that is made into a project at any given period of…

Q: Please explain about the share of loss, where do the numbers come from?

A: In accounting, if shareholder's profit sharing ratio is not given, Profit/(loss) is shared among…

Q: How should changes in the estimated unguaranteedresidual value be handled by the lessor?

A:

Q: Pessimistic means the asset has return. a. Best b. Worst

A: There are three economical out comes are present. 1. Base case 2. Best case 3. Pessimistic

Q: A reasonable probability that an investment will produce a loss a. risk b. value c. specualtion…

A: There are several investment styles through which one can generate profits or build wealth.

Q: In a margin account, the interests should be higher than the returns. TRUE OR FALSE?

A: In a margin account, the investor borrows from the broker. So, it is not necessary that the interest…

Q: what is the difference between a required rate of return and an expected rate of return?

A: Rate of return (ROR) is a value at which an investor earns additional amount on invested amount…

Q: What is Profit and Loss (PNL)?

A: A business organisation is established with an objective to make money and increase the worth of the…

Q: profits and losses equally

A: Correct Answer :- B Peter  P170,000. And  john P90000

Q: ___________ is the possible loss of revenue resulting mainly from a decline in the revenue base.…

A: There are various risks

Q: How can we invest in two assets with dissimilar return characteristics?

A: Diversification is one of the tactics to keep in mind while forming a portfolio. Investing all the…

Q: What is loss aversion?

A: What is loss aversion?

Q: What is the relationship between a discount rate (or IRR) and a capitalization rate? What causes…

A: Introduction: The discount rate is nothing but a rate that reduces potential cash flows in order to…

Q: The fisher effect primarily emphasizes the effects of on an investor's rate of return

A: The fisher effect states that: Long term nominal interest rate  = real interest rate + expected…

Q: How can we invest in multiple assets with dissimilar return characteristics?

A: Diversification is one of the tactics to keep in mind while forming a portfolio. Investing all the…

Q: have led to a drop in the required rate of return?

A: Required Rate of return is the minimum rate of return which an investor expects for investing in a…

Q: What is net present value? Can it ever be negative? Explain.

A: Net present value: Net present value is a technique used in capital budgeting to see the project is…

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary. 

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.