A stock with price 100 kr follows a one step Binomial model and will either increase invalue to 120 kr or decrease to 90 kr in one years time. The risk free interest rate is zero.An investor consider the increase and decrease in this model to be
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.
is this statement TRUE or FALSE ?
A stock with price 100 kr follows a one step Binomial model and will either increase invalue to 120 kr or decrease to 90 kr in one years time. The risk free interest rate is zero.An investor consider the increase and decrease in this model to be equally likely to happen.Is it true or false that the investor is risk-averse?
is this statement TRUE or FALSE ?
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