p) demonstrate an understanding of the constructions of a synthetic call by identifying the breakeven stock price, the maximum profit, and the maximum loss. q) Define the following terms: combination, spread, buying the spread (debit spread), selling the spread (credit spread), money (vertical or strike) spread, calendar (horizontal or time) spread r) demonstrate an understanding of bull spreads by defining bull spreads, discussing the circumstances under which investors would use a bull spread strategy. s) demonstrate an understanding of bear spreads by defining bear spreads, discussing the circumstances under which investors would use a bear spread strategy. t) demonstrate an understanding of collars by defining collars, discussing the circumstances under which investors would use a collar strategy.
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.
p) demonstrate an understanding of the constructions of a synthetic call by identifying the breakeven stock price, the maximum profit, and the maximum loss.
q) Define the following terms: combination, spread, buying the spread (debit spread), selling the spread (credit spread), money (vertical or strike) spread, calendar (horizontal or time) spread
r) demonstrate an understanding of bull spreads by defining bull spreads, discussing the circumstances under which investors would use a bull spread strategy.
s) demonstrate an understanding of bear spreads by defining bear spreads, discussing the circumstances under which investors would use a bear spread strategy.
t) demonstrate an understanding of collars by defining collars, discussing the circumstances under which investors would use a collar strategy.
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