The Capital Asset Pricing Model is not the only asset pricing model around. One of the competing approaches to asset pricing is called the Arbitrage Pricing Theory, which was developed to address some of the criticisms of the CAPM.

The CAPM is not inconsistent with the APT. Although its intellectual foundations differ, the two theories are basically arguments that the expected return of a security (i.e. the appropriate discount rate for its cash flows!) is a linear function of systematic risk. The major difference in practice between the CAPM and the APT is that the CAPM uses one risk variable, the market portfolio, while the APT uses several, which is largely the reason why I'm partial to the APT. The APT factors are typically macro-economic - they are related broadly to the economy. None the less, these factors will also affect the market portfolio. Thus, when you use the CAPM, the one single factor will reflect the variation in the APT factors.

The CAPM is a classical model in finance. It is an equilibrium argument that, if true, answers most important investment questions. It tells us where to invest, how to invest and what discount rate to use for project cash flows. Not only that, it is a disarmingly simple model. The expected return of a security depends upon a simple statistic: à?. The relationship between risk and return is linear. Calculation of portfolio risk is trivial. At the same time, the CAPM is revolutionary. It tells us that the variance of a project is NOT a factor in determining the appropriate, risk-adjusted discount rate. It turns financial research from roll-up-your-sleeves fundamental analysis into a statistics problem. In short, the CAPM turned Wall Street on its head.

Here comes the bad news. Despite twenty years of attempts to verify or refute the Capital Asset Pricing Model, there is no consensus on its legitimacy. There are a few hints that the model is ...

Please help with the following problems. Provide step by step calculations along with explanations.
Given the following: Spot rate = $0.75/DM
Forward rate (1 yr) = $.077/DM
Interest rate (DM) = 7% per year
Interest rate ($) = 9%

I need 100 word original notes in answering the following questions:
1. What is operating leverage and how does it influence a project?
2. What are the two methods for estimating debit cost of capital, and what do you do when there is default risk? Explain the circumstances in which you would use each method.
3. In what

Consider the following prices from a McDonalds Restaurant:
Big mac sandwich $2.99
Large coke $1.39
Large Fry $1.09
A McDonalds Big Mac value meal consists of a Big Mac sandwich, large Coke, and a large fry. Assuming that there is a competitive market for McDonalds food items, a

Assume you are a trader with Deutsche Bank. From the quote screen on your computer terminal, you notice that Dresdner Bank is quoting ?0.7627/$1.00 and Credit Suisse is offering SF1.1806/$1.00. You learn that UBS is making a direct market between the Swiss franc and the euro, with a current ?/SF quote of 0.6395. Show how you

Please help with this question.
A one year oil futures contract is selling for $74.5 . Spot oil prices are $68 and the one year risk free rate is 3.25%. The arbitrage profit implied by these prices is________?

Consider two securities that pay risk-free cash flows over the next two years and that have the current market prices shown here:
Security Price Today ($) Cash Flow Cash Flow
in One Year ($) in Two Years ($)
_________________________________________________________

32. Assume that locational arbitrage ensures that spot exchange rates are properly aligned. Also assume that you believe in purchasing power parity. The spot rate of the British pound is $1.80. The spot rate of the Swiss franc is .3 pounds. You expect that the one-year inflation rate is 7 percent in the U.K., 5 percent in Switze

Estimate the cost of equity (expressed in percentages or in a decimal format) or the rate of return that Accuray's shareholders 'require'. Use the Capital Asset Pricing Model (CAPM) in order to estimate the rate of return that shareholders require on their investment. Show all calculations.
How would you go about finding the

Mary Joe has a credit line of $1,000,000 (or equivalent in major currencies) for arbitrage. She had access to the following rates, and she managed to generate CIA profits. Replicate her arbitrage and calculate her profits based on the following rates:
Assumptions
Value
SFr. Equivalent
Arbitrage funds available
$1,000,000
S