Question 7 Table 538: Spot Curve 6 months ago Years to today Years to Maturity Spot Rate Spot Rate Maturity 0.5 1.23% 0.5 1.14% 1 2.49% 1 2.06% 1.5 2.33% 1.5 2.46% 2 3.7% 2 4.76% 2.5 4.74% 2.5 4.29% 3 5.49% 3 5.14% The zero coupon curves above were published by Bestina Financial six-months ago and today. The reported rates were derived using semiannual compounding. Suppose that you entered the Forward Rate Agreement six months ago to lend $41,000 for six months starting in two years. Find the current value (today) of your FRA that you entered six months ago. Answer: Enter your answer as a positive or negative numeric value rounded to 4 decimal places.

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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.