Please answer each question with a min of 150 words, ALL should be in your own words (no cutting and pasting from another source)
- Understand how capital gains and percentage returns are calculated.
- Explain the difference between average stock returns and risk-free returns.
- Describe the significance of US equity risk premiums as a method of comparison with other countries.
- Describe how variance and standard deviation are used to measure the variability of individual stocks.
- Explain how an investor chooses the best portfolio of stock to hold.
- Describe the relationship between risk and expected return (CAPM).
- Explain how the risk-free rate, market risk premium and stock beta are used to calculate expected returns using the capital asset pricing model (CAPM).
- Explain how cyclicality of revenues and operating leverage help determine beta.
- Describe the dividend discount model (DDM) approach and how is it different than CAPM.
- Compare and contrast the various types of swap contracts.
References:
Ross, S., Westerfield, R., Jaffe, J. & Jordan, B. (2016). Corporate finance (11th edition). New York, N.Y. McGraw-Hill Education.