Analysis CAPM model, Beta and Expected Return on Shares
Not what you're looking for?
What would you expect the effect to be of the following changes on the market price of a company's shares, all other things being the same? Provide an explanation of your expectation.
a. Investors demand a higher required rate of return on shares in general
b. The covariance between the company's rate of return and that for the market decreases
c. The standard deviation of the probability distribution of rates of return for the company's stock increases
d. Market expectations of the growth of future earnings (and dividends) of the company are revised downwards.
Purchase this Solution
Solution Summary
An analysis of CAPM model, Beta and Expected return on shares are given. The expert examines the investors demand for a higher required rate of return on shares in general.
Solution Preview
I have put my comments in your original file.
Generally, you need to think about what each change means in terms of the CAPM equation and remember that CAPM says the return level is compensation for risk.
-----------
Question
What would you expect the effect to be of the following changes on the market price of a company's shares, all other things being the same? Provide an explanation of your expectation.
a. Investors demand a higher required rate of return on shares in general
b. The covariance between the company's rate of return and that for the market decreases
c. The standard deviation of the probability distribution of rates of return for the company's stock increases
d. Market expectations of the growth of future earnings ...
Purchase this Solution
Free BrainMass Quizzes
Lean your Process
This quiz will help you understand the basic concepts of Lean.
IPOs
This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)
Basic Social Media Concepts
The quiz will test your knowledge on basic social media concepts.
Team Development Strategies
This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.
MS Word 2010-Tricky Features
These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.