Define risk-free asset (in no more than 3 lines). [Hint: Focus on the features of the assetitself.]Is the following statement true or false. Briefly explain your answer."There can not be a universally risk-free asset for all investors."[Hint: Think about investor's investment horizon vs. the asset's time to maturity, inflation,etc.]

There are various options available for investment. Some of them provide high or good returns or…

Answered: Define risk-free asset (in no more than…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 10MC

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Is the following statement true or false. Briefly explain your answer. “There can not be a universally risk-free asset for all investors.” [Hint: Think about investor’s investment horizon vs. the asset’s time to maturity, inflation, etc.]
Whether the following statement is true or wrong. Briefly explain your answer. "It is impossible to have an asset that is risk-free for all investors.” [Hint: Consider the relationship between the investment period of investors and asset maturity, inflation and other factors.)
Give typing answer with explanation and conclusion Please could you anwser it with true or false : Q1)Risk-neutral evaluation assumes that the expected return on the underlying asset is the risk-free rate and discounts at the risk-free rate.
Market risk ________. a. is equal to the rate of return generated by a risk-free asset b. cannot be eliminated, as it is non-diversifiable c. is synonymous with diversifiable risk d. is synonymous with financial risk
(please correct answer and incorrect answer explan and correct answer)
Let rf be the risk free rate of interest. E[r e ] be the expected return of some risky asset. Suppose that this risky asset pays out in states when the aggregate endowment is particularly low. There are three possibilities: ( a) E[r e ] > rf (b) E[r e ] = rf (c) E[r e ] < rf Which case applies to E[r e ] and why?
An investment requires a total return that comprises: O a real rate of return and compensation for inflation. a real rate of return, compensation for inflation, and a risk premium. compensation for inflation and a risk premium. a real rate of return, compensation for inflation, a risk premium, and compensation for time and effort devoted to researching alternative investments. None of the above
Think about whether a risk-free asset should earn a risk-premium beyond the risk-free rate. Thinking about that should give you an idea of the beta for a risk-free asset. Or, look again at the CAPM equation: E(Ri)=Rf+βi[E(RM)−Rf] Given this equation, what beta sets the E(R) of the risk free asset equal to the risk-free rate? A) zero B) 0.5 C) 1.0 D) its random
1) Let us start with what is the difference between a real and a financial asset? 2) What is the risk-return tradeoff?
K possible Risk-Free Rate. What is a risk-free rate? Give an example of an investment with a risk free rate. Why is there no risk? A risk-free rate is: (Select the best answer below.) OA. an interest rate that is not guaranteed on an investment for a specified period. OB. an interest rate guaranteed on an investment for a unspecified period. OC. an interest rate guaranteed on an investment for a specified period. OD. an interest rate that is not guaranteed on an investment for an unspecified period. There is no risk because a risk-free investment: (Select the best answer below.) OA. pays an interest rate guaranteed on an investment for an unspecified period. OB. would pay investors even if the financial institution went into bankruptcy. OC. is a checking account. OD. is a zero interest loan.
Can someone give an example or scenario about the following: 1. Capital Asset Pricing Model2. Market Risk premium3. Risk free rate4. Security market line5. Systematic risk
1. According to the information in the table given below, fill in the blanks with correct option: Moderate Risk-Profitability / Low Risk-Profitability/ High Risk-Profitability Asset Maturity Financing Maturity Long Term Short Term Short Term 1(?) 2(?) Long Term 3(?) 4(?)

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