0
Relationship btwn an investor's required rate of return and value of security?
Wiki User
∙ 11y ago
Wiki User
∙ 11y ago
Add your answer:
Earn +20 pts
What is the rate of return required by investors in the market for owning a bond called?
YTM
The CAPM implies that investors require a higher return to hold highly volatile securities?
The CAPM relates the expected return on a security to that of the overall market portfolio. A highly volatile security will have a high covariance with the market portfolio. Since beta equals the covariance of the security with the market portfolio divided by the variance of the market portfolio, the result is a high value of beta. When this high value of beta is plugged into the CAPM formula, all else not changed, the required return on the security (ra) is going to increase, implying investors require a higher return to hold a highly volatile security. t
Why do bond investors have lower required rates of return than do stock investors?
They take less risk, theoretically, so they have lower expectations.
The risk-return relationship for each financial asset is shown on?
the security market line
The return that investors feel is most likely to occu based on current available information?
The expected return is the return investors feel most likely to occur based on currently available information.
Relationship between required rate of return and coupon rate on the value of a bond?
required rate of return is the 'interest' that investors expect from an investment project. coupon rate is the interest that investors receive periodically as a reward from investing in a bond
What is the rate of return required by investors in the market for owning a bond called?
YTM
The CAPM implies that investors require a higher return to hold highly volatile securities?
The CAPM relates the expected return on a security to that of the overall market portfolio. A highly volatile security will have a high covariance with the market portfolio. Since beta equals the covariance of the security with the market portfolio divided by the variance of the market portfolio, the result is a high value of beta. When this high value of beta is plugged into the CAPM formula, all else not changed, the required return on the security (ra) is going to increase, implying investors require a higher return to hold a highly volatile security. t
Explain why a characteristic of an efficient market is that investments in that market have zero NPVs?
On average, the only return that is earned is the required return-investors buy assets with returns in excess of the required return (positive NPV), bidding up the price and thus causing the return to fall to the required return (zero NPV); investors sell assets with returns less than the required return (negative NPV), driving the price lower and thus the causing the return to rise to the required return (zero NPV).
Why do bond investors have lower required rates of return than do stock investors?
They take less risk, theoretically, so they have lower expectations.
What is the relationship between wacc and discount rate of return?
relationship between WACC and required rate of return.
One security has a greater risk than another security how will investors respond?
They will require a higher rate of return for the investment that has greater risk
The risk-return relationship for each financial asset is shown on?
the security market line
The risk return relationship for each financial asset is shown on?
the security market line
The return that investors feel is most likely to occu based on current available information?
The expected return is the return investors feel most likely to occur based on currently available information.
How would the security market line shift if inflation decreased and investors became more risk adverse?
it will shift up, the slope will remain the same
Show the relationship between required rate of return and coupon rate on the value of a bond?
bal amar pel
