please answer both. If a stock's fair return increases, what will happen to the stock's value? A. It will increase. B. It will not change. C. It will decrease. If the market risk premium rises, what will happen to the stock's price? A. It will not change. B. It will increase. C. It will decrease.
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.
please answer both. If a stock's fair return increases, what will happen to the stock's value?
| A. |
It will increase. |
|
| B. |
It will not change. |
|
| C. |
It will decrease. |
If the market risk premium rises, what will happen to the stock's price?
| A. |
It will not change. |
|
| B. |
It will increase. |
|
| C. |
It will decrease. |
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