The table below shows the forecast cash flow information of Good Time Inc. for the next year. The required debt payment in the next year is $88 million, with a current market value of $60 million. The company pays no tax. If you invest in the corporate debt of Good Time Inc. today, what is your expected return on this investment?
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.
The table below shows the
year. The required debt payment in the next year is $88 million, with a current market value
of $60 million. The company pays no tax. If you invest in the corporate debt of Good Time
Inc. today, what is your expected return on this investment?
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