The investor has set aside an amount of Rs 5,00,00 to be equally divided into aggressive and defensive portfolio. He wants to follow Constant Rupee Plan and rebalance the portfolio whenever there is a trigger point of 20% change or more in the market price of aggressive portfolio. Given the share price movement below show how the portfolio rebalancing will be carried out and compare the Plan with Buy and Hold strategy. Period Price 1 125 2 140 3 150 4 135 5 125 6 115 7 125 8 145

Q: Assume the riskless rate of interest is 2% per year, and the expected rate of return on the market…

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Q: Suppose you are an investor with a choice between three securities that are identical in every way…

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A: As per Capital Assets Pricing Model the expected return is calculated with the help of following…

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A: Hi There, Thanks for posting the questions. As per our Q&A guidelines, must be answered only one…

Q: Click the icon to see the Worked Solution. The required return for investment A is %. (Round to one…

A: Capital Asset Pricing Model (CAPM): This model attempts to explain the relationship between the…

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Q: a.) Using Capital Asset Pricing Model (CAPM) to compute an appropriate rate of return for Intel…

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A: REWARD TO RISK RATIO :  = (EXPECTED RETURN - RISK FREE RATE) / BETA

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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.