Question 3 Given the same probabilities and payouts, calculate the Risk Premium for the decision as it pertains to this decision maker? P($1,000) = 33% P($800) = 21% P($0) = 33% %3D P(-$1250) = 13% $270.1985 $135.1985 -$135.1985 -$270.1985

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A: The standard deviation of risk free asset = 0%

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A: We need to use CAPM model to calculate required rate of return.. Required rate of return =Risk free…

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A: CAPM return is called as Capital Asset pricing method. It is calculated by using the given below…

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A: Liquidity Preference Theory and Expected ReturnThe liquidity preference theory suggests that…

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A: The IR of the portfolio refers to the measure of the performance of a portfolio calculated by…

Q: 34. An asset sells for price Po= $190 today, and people expect to be able to sell them for P₁ = $210…

A:

Q: Risky Asset A B E(r) (stddev) 9% 5% 20% PAB 0.30 10% "Rate on Treasure bills (risk-free rate of…

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Q: 11,12,13,14 and 15 please

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A: It can be calculated using following in excelNORMINV(probability,mean,standard_dev)

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Q: Portfolio management Q8

A:

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A:

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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.