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- CAPITAL ASSET PRICING MODEL ANALYSIS OF PROJECT
- THE CAPITAL ASSET PRICING MODEL STUDIES THE RISK-RETURN
- IMPACT OF AN INVESTMENT PROPOSAL UPON AN INVESTOR'S PORTFOLIO
- OF STOCKS AND OTHER INVESTMENTS. THE MODEL GIVES THE EXPECTED
- RETURN FOR AN INVESTMENT GIVEN THE EXPECTED RETURN FOR THE
- MARKET AS A WHOLE, THE RISK-FREE(I.E. U.S.TREASURY BOND)
- INTEREST RATE, AND THE VOLATILITY OF THE RETURN ON THE INVEST-
- MENT WITH RESPECT TO THE REST OF THE MARKET. A VOLATILITY OF
- 1 MEANS THE RETURN ON THE INVESTMENT WILL CHANGE JUST AS THE
- MARKET CHANGES, A VOLATILTY GREATER THAN 1 MEANS THE INVEST-
- MENT'S RETURN MOVES IN THE SAME DIRECTION AS THE MARKET BUT
- AT A MORE RAPID RATE. VOLATILITY OF 0 MEANS THE RETURN ON THE
- INVESTMENT IS INDEPENDENT OF MARKET MOVEMENT. NEGATIVE
- VOLATILITY MEANS RETURN ON THE INVESTMENT AND THE MARKET MOVE
- IN OPPOSITE DIRECTIONS.
- PRESS ENTER TO CONTINUE?
- FOR PUBLICLY TRADED STOCKS VOLATILITY MAY BE ASCERTAINED
- BY EXAMINING THE LITERATURE. JUST LOOK FOR BETA.
- FOR OTHER INVESTMENTS ASCERTAINING VOLATILITY IS SOMEWHAT
- MORE DIFFICULT.
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- PRESS ENTER TO BEGIN?
- ENTER TREASURY INTEREST RATE(%) ? 2.75
- ENTER EXPECTED MARKET RETURN(%) ? 5.25
- ENTER VOLATILITY FOR INVESTMENT ? 0.10
- THE EXPECTED RETURN ON THIS INVESTMENT IS 3 %
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- PRESS ENTER FOR MORE COMPUTATIONS? -1
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