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.
Define the term Risk-Adjusted Discount Rate Approach?
The estimation of the present value of cash for high-risk investment is known as a risk-adjusted discount rate. A very well-known case of risky investment is real estate.
The risk-adjusted discount rate reflects occasional returns expected by financial specialists to attract assets to the property question. Ordinarily, it is estimated as a level of the hazard free rate and risk premium.
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