If both deals fail, then A will have a more negative return than B.

Q: The empirical SML is too flat relative to what CAPM predicts. Researchers have focused on which two…

A: The empirical Security Market Line (SML) is a representation of the relationship between systematic…

Q: In engineering economics, if PW <0 this means to reject the project, because it is not economically…

A: The present worth of a project is calculated by the discounting the future cash inflows and outflows…

Q: A long forward contract becomes more valuable as the price of the asset declines Group of answer…

A: An agreement between a buyer and a seller to buy an item at a specific price and date in the future…

Q: The discounted payback rule will give the same result as the NPV rule when the cut-off rule is…

A: Net present value (NPV): The net present value is a technique used for making the investment…

Q: Examples of a market order, limit order and a stop loss?

A: To buy or sell Common stock or shares of a firm, you can place different types of buy/sell orders…

Q: ROE can be disaggregated into operating and nonoperating returns. Nonoperating return will be…

A: ROE stands for "Return on Equity" it's a financial metric that measures the profitability of a…

Q: conomics is concerned

A: To explain the correct option as,

Q: the interest is nominal is that still good for this answer?

A: Formula used is: (1+Real rate) *(1+Inflation rate)= (1+ Nominal rate)

Q: In general it argued that the lower of cost of market rule is supported most closely by which of the…

A: The lower of cost or market rule is related to valuing the inventory, the company should value the…

Q: If the underling is a liability rather than an asset, then the option premium should become…

A: The main objective of the derivative market is to secure the investment portfolio against price…

Q: general, what does a high Tobin's Q value indicate and how reliable does that value tend to be?

A:

Q: Suppose that a firm must choose between two mutually exclusive projects, both of which have negative…

A: Net Present Value: The difference between the present value of cash inflows of the project and the…

Q: ate two reasons why the strong form of market efficient is important

A: Efficient market hypothesis is very important concept in the stock market analysis and understanding…

Q: Although we can determine the optimal bid and the expected profit from that bid in a bidding…

A: To determine the probability of winning in a bidding simulation, one must examine several factors…

Q: Define weak form tests of market efficiency and their main objective. Describe in detail the three…

A: As per Weak Form Tests of Market Efficiency, based on the record of volumes and price movements of…

Q: If the decision is to select the alternative with the maximum profit, then the alternative with the…

A: Present worth is the present value of all future cashflows discounted at given discount rate

Q: True or False

A: The question is asking whether an increase in volatility would increase the cost of an options…

Q: why buying on margin is less riskier than short selling?

A: Trading on margin is a process of borrowing funds from a brokerage firm in order to execute trade…

Q: be regarded as high risky when

A: Risk and return are positively correlated. If the risk for an investment is high, the more will be…

Q: What is the payback method? What are its main strengths and weaknesses?

A: Explain the meaning of the payback method.   The payback period is the expected time period which is…

Q: which of the following is true? a lower payment amount results in a higher FV, other things equal.…

A: Future value is the value of the money invested today at some future date on the basis of the…

Q: You might want to sell an option to prevent further losses if its market price is dropping. True…

A: Selling an option to prevent further losses when its market price is dropping is not a good…

Q: 1. a. Prove rigorously "Constant relative risk aversion CRRA implies decreasing absolute risk…

A: The Constant Relative Risk Aversion (CRRA) utility function is provided by W, where W signifies…

Q: Give an example of Mixed-Dollar Analysis?

A: Mixed-Dollar Analysis is commonly known as a currency basket that consists of different currencies…

Q: he investment with the higher payback period is better.  Select one: True False

A: Payback period is the recovery of initial investment from the cash inflows from the investment.

Q: Is the accept-or-reject decision rule the same as in the simple -investment case? Explain how?

A: Yes, accept or reject decision rule is the same as in the simple investment because accept or reject…

Q: In the Vasicek Model , the short term rate cannot go negative . True False

A: The Vasicek Model is a popular interest rate model used to price financial instruments and to…

Q: Are you agree with the - return curve slop of a risky has a negative slop."? explain why?**…

A: The exchange rate indifference curve is the curve between the exchange rate and demand for given…

Q: If the underling is a liability rather than an asset, then the strike price of the option should be…

A: The option is a financial security since a buyer can purchase the right rather than the obligation…

Q: Please explain why this statement is (False).  If a security's realized return is negative, it must…

A: The realized return of the security is the return that the security has provided in the past. The…

Q: What are some criticisms of the payback method?

A: Payback Period: Payback period is the period in which the project recovers its initial cost of the…

Q: did hedging reduce volatility of the realized price?Answer Yes or No and explain

A: Hedging can be referred as a strategy that is used by the investors to reduce the risk associated…

Q: Is there any justification for an investor to invest in assets with a negative beta?

A: Beta is the measure of Risk associated with the investment.The Beta measure the Systematic risk .so…

Q: If the rates of return of two assets tends to move in the same direction, they have a negative…

A: Covariance measures the relationship of direction between the returns on two assets or securities.…

Q: By choosing assets that do not exhibit a high positive covariance with each other, the systematic…

A: Systematic risk is the risk associated with the market and is inherited to all securities in the…

Q: In a margin account, the interests should be higher than the returns. TRUE OR FALSE?

A: In a margin account, the investor borrows from the broker. So, it is not necessary that the interest…

Q: What strategy has the greatest chance of creating large losses? A. Writing a covered call B.…

A: A covered straddle is an options strategy that helps to earn profit from bullish price movements by…

Q: Which of the following statement is incorrect?   The expected cost of risk per participant will…

A: (b) The pooling structure minimizes the risk (standard deviation) for pool participants when losses…

Q: True or false explain   a. For  , when the spot price  is  the strike price, then the profit/loss…

A: We have to check the accuracy of both the statements, we can see that spot and strike are same so…

Q: Technical analysis can only be profitable when:   a. The market is weak form efficient   b. The…

A: Weak form of capital market efficiency- In this form of market only the past information  about the…