Define Present value and future value. If present value and future value are equal what is the rate? Is future value always greater than present value?
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.
The time value of money is an important concept in finance which states that the money a person receives today has more worth than money he may receive after a period of time due to its opportunity cost and earning capacity. This earning capacity of money makes it more worthy if received in present than in future.
Step by step
Solved in 4 steps
