Risk Relation between Risk and Return
Write an assessment in which you address the following problems/questions:
Assess how diversification benefits the investor. Can you imagine circumstances where an investor would not want to diversify?Explain why or why not.
Analyze the formulation of the Capital Asset Pricing Model, including the definition of the model with identification of each component.
Explain how the CAPM development effectively makes use of the diversification as a foundation for the development of the model.
Discuss the uses of the Capital Asset Pricing Model within finance.
Develop the Capital Asset Pricing Model using the assumptions that the risk-free rate is 3%, the expected return on the market is 8%, and the relevant beta is 1.05.
Use problem 3 to develop the alternative solutions presented within a table for the assumptions that the beta is 0.75, 1.05, and 1.75 as well as the assumption that the risk free rate is 1%, 3%, and 6.5%.
Develop a valuation model for a common stock assuming that a company just paid a dividend of $1.75 per share.
Demonstrate thoughtful consideration of the ideas and concepts presented in the course by providing new thoughts and insights relating directly to this topic.
- Your response should reflect scholarly writing and current APA standards.
- Be sure to adhere to Academic Integrity Policy.
- Length: 5-7 pages.
- References: Include a minimum of 5 scholarly resources.