A high value for the PS ratio is consistent with: Da high value of the levered 8 of equity. a high net profit margin (NPM). )a high value of the risk-free rate (r). ) a high market risk premium (r.

Q: None

A: To determine the price today of claims that pay S(T)Q(T)​ and S(T)Q(T)​, we will use the given…

Q: One main assumption of the segmented markets theory is that: Select one: O A. Bonds of different…

A: The theory which states that short term interest rate and long term interest rates are not related…

Q: Investors require a _____ return as compensation for taking ____ risk. A) higher, margin B)…

A: Risk is the possibility that the actual return on any investment made might be different from the…

Q: What is the formula to find an expected in returns in CAPM

A: In this question, we are required to determine the formula for expected return in Capital Asset…

Q: _______ is a measure of risk while _______ is a measure of risk and liquidity.

A: Capital budgeting is the process of distributing the resources(finance) of the organization in…

Q: 1. Lower duration means higher interest rates risk (inverse relationship). Select one: True False

A:

Q: An estimation by marginal investor, a higher expected return is earned on A. more risky securities…

A: An estimation by marginal investor , a higher expected return is earned on more risky securities.

Q: An upward-sloping yield curve

A: An upward sloping yield curve: may reflect the confounding of the liquidity premium with interest…

Q: Which of the following statements about payback (payback period) is most correct?   a.  Payback…

A: Payback period is a financial metric that measures the length of time it takes for an investment to…

Q: (DOUBLE CREDIT a. Where the left and right tic-marks are exercise prices 60 and 80, respectively,…

A: options contracts have the option of right to buy but not the obligation to the investor on…

Q: A risk-free asset by definition has a beta of zero. OA. True B. False

A: Required return formula as per capital asset pricing model is: Required return = Risk free rate…

Q: The VIX measures Select one: a.Realized volatility B. Current volatility C. Historical volatility D.…

A: The VIX stands for volatility index. Volatility index was the first benchmark which was created by…

Q: Profit volume ratio is used for the calculation of: Select one: O a. For all options provided b.…

A: The profit-volume ratio, which is commonly calculated as a percentage, reflects the connection…

Q: 1. The diversifiable risk of a portfolio: a. Is correlated with systematic risk. b. Can be made…

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: What is the most likely impact on return on equity of an increase in operating expense margin, all…

A: Operating expenses are required to run the business. AN increase in operating expenses reduces the…

Q: What is the projected probability of default for the borrower? What is the projected probability of…

A: The probability of default of a loan can be defined as the probability of a loan applicant not…

Q: The static GAP focuses on monitoring net interest income in the long term.   Select one: True…

A: The Static GAP focuses on monitoring net interest income in the short term but it can be calculated…

Q: The additional return over the risk-free rate needed to compensate investors for assuming an average…

A: Basis the general principle that higher risk security do have the higher returns, it is known that…

Q: A portfolio that is positively correlated with the market portfolio but not particularly sensitive…

A: In statistics, +1.0 beta value represents a perfect positive correlation. 0 denotes no correlation…

Q: The W.A.C.C. is a :  a Composite opportunity cost metric  b Simple opportunity cost metric  c…

A: The overall cost of capital, also known as the Weighted average cost of capital (WACC), is the…

Q: K possible Risk-Free Rate. What is a risk-free rate? Give an example of an investment with a risk…

A: Please refer below page.If you have any questions feel free to ask.Explanation:

Q: The additional compensation that investors require to take on higher risk investments is the a.…

A: The risk associated with an investment refers to the probability of loss that an investor bears when…

Q: Under prospect theory, the shape of the utility function implies that investors are

A: Under prospect theory, the shape of the utility function implies that investors are: (A) Always risk…

Q: Consider the following financial market with two risky assets x and y as well as a risk-free asset…

A: Any location or system that gives buyers and sellers the ability to exchange financial assets, such…

Q: If I have that the standard estimator of the volatility parameter is 0.2491, how can I estimate the…

A: The geometric Brownian motion (BM), in stock prices is given by the relationship: S(t) =…

Q: The the expected return, the the risk. O a. lower; higher O b. higher,lower O c. higher; higher more…

A: Expected return and risk are correlated

Q: The internal rate of return is: discount rate that makes the profitability index (PI) greater than…

A: IRR and PI are important tools of capital budgeting along with NPV. IRR refers to the internal rate…

Q: compounding are different for investors so that re< Tb. Show that the no-arbitrage forward price…

A: Given SaerlT  &lt;=F(0,T)&lt;=SaerbT Requirement : Show that the no-arbitrage forward price F(0,T)…

Q: . The difference between the expected (c equired) return for the market portfolio ar he risk-free…

A: This pertains to the CAPM (capital asset pricing model). The difference between expected return on a…

Q: risk premium (RP) expected return on a portfolio,r^P realized rate of return, r¨ diversification…

A: 1) Risk premium is the return you earn over and above the risk-free rate. It is calculated by…

Q: risk premium: (a) The risk premium indicates the amount of compensation investors require for…

A: Market risk premium or the risk premium is the extra returns that is required by the invester for…

Q: A change in the risk premium, E(Rm) - Rf, results in... a) A change in the vertical intercept of…

A: concept. The security market line (SML)  gives the market’s expected return at different levels of…

Q: if asset A has lower volatility than asset B, then it contributes less to the overall volatility…

A: Volatility is change in expected rate of assets from the mean return and it shows the risk involved…

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: Ayield curve states that the long-term interest rate is higher than the short-term interest rates.

A: A Yield Curve, also commonly referred to as "The Term Structure of Interest Rates", depicts the…

Q: Q2. How portfolio return and risk is calculated? Explain the role of correlation among asset in…

A: The Sharpe rating measures investment profits that exceed the risk-free ratio, per unit of standard…

Q: 11 The following is a correct statement concerning risk premium: A.The lower the average rate of…

A: Volatility means how the asset's prices changes around the mean prices or market prices. Higher the…

Q: The elasticity of the change of the price of debt toward the change in interest rate is the absolute…

A: Duration is a measure of the sensitivity of the price of a bond or other debt instrument to a change…

Q: A coefficient of determination of 0.6 means that \\( 40 \\% \\) of the variation in a security's…

A: The coefficient of determination, denoted as R2, is a statistical metric used to evaluate the…

Q: The market risk premium:   Decreases with the risk aversion of investors in the market…

A: The market risk premium is the additional return that investors demand over and above the risk-free…

Loanable Funds Theory

The loanable funds theory is a neoclassical theory that determines the interest rate where the demand for loanable investments and supply of loanable funds intersect. To determine the interest rate, this theory employs linear regression and a demand curve. At the equilibrium point, demand for borrowings and demand for the issuance of borrowing funds are inextricably linked. This point of equilibrium should equalize demand and the supply of money available for borrowing.