This website uses cookies to ensure you have the best experience. Learn more

Principles Of Finance Assignment 2

1790 words - 8 pages

Assignment 2
Principles of Finance – FIN 100
Ginger Tyner
Strayer University
Professor Kalonji Ntambwe
November 28, 2010


Abstract
This Report will contain answers to five (5) questions asked concerning:
• Identify the components of a stock’s realized return.
• Knowing the contrast of systematic and unsystematic risk
• Explaining why Total Risk of a Portfolio is not equal to Weighted Average Risk of securities in a portfolio.
• Understanding what Beta measures
• Understanding what WACC measures and understand WACC assumptions used to value a project.

Assignment 2
1. Identify the components of a stock’s realized return.
The component of a stock’s realized return is ...view middle of the document...

Systematic risk is beyond the control of investors and cannot be mitigated largely. The systematic risks are unavoidable and the market does compensate for taking exposure to such risks. In contrast, An unsystematic risk is one that affects a single asset or a small group of assets. Because these risks are unique to individual companies or assets, they are sometimes called unique or asset-specific risks. Unsystematic risk is due to factors specific to an industry or a company like labor unions, product category, research, and development, pricing, marketing strategy etc. the unsystematic risk can be
mitigated through portfolio diversification. It is a risk that can be avoided and the market does

not compensate for taking such risks. (Berk, DeMarzo, and Harford, 2010)

3. Explain why the total risk of a portfolio is not simply equal to the weighted average of the
risks of the securities in the portfolio.
the total risk of a portfolio is not simply equal to the weighted average of the
risks of the securities in the portfolio, because,
4. State what beta measures and its uses
Beta is one of the most used and misused of the financial ratios. It represents an investment’s non-diversifiable risk (and not its total risk) relative to the market risk. Beta is used to measure a stock’s price volatility in relation to the rest of the market. It provides data sources of estimates on historical data. Most data sources use five years of monthly returns to estimate.
5. State what WACC measures and explain the WACC assumptions used to value a project. The cost of capital is mainly used for capital budgeting purposes i.e. to decide which projects to take up, and which to reject. The idea of judging a project with the cost of capital is that if the project cannot return more than the cost of money financing it, it should be rejected.
Using the WACC to evaluate a project makes a couple of assumptions:
• The project will be financed at the same capital structure as the entire firm.
• The risk of the project is the same as the risk of the whole company.
• Violation of these assumptions makes WACC a wrong tool to use. For example, if company is introducing a new product, such as televisions, then evaluating this proposed project with the company’s cost of capital is fine. But, if the company wanted to enter into the retail clothing business, then the WACC of the company is not appropriate for evaluation of this project. One has to calculate a separate project cost of capital.


Title of Paper (Does not Count as Heading)
The introduction to the paper should not have a name, especially not "Introduction" (American Psychological Association, 2009). The first part of the document is assumed to be the introduction. This information is given on page 63 in the new APA guidelines.
Spacing, Indentation, and Headings (Level One Heading)
Paragraphs are indented one half inch and the space key should never be used to set the...

Other Papers Like Principles of Finance Assignment 2

The Literature of Corporate Governance Principles 2

3738 words - 15 pages investments. Although this event has started the change in the Cypriots’ view of the Corporate Governance Principles, many companies don’t take the principles seriously, and the full benefits of these principles are not received. Problem Statement: Corporate Governance is a set of rules a company should follow and is the key to the reliability of corporations, financial institutions and markets, maintains the stability of the economies. (OECD

Qcf Level 2 Principles of Infection

2411 words - 10 pages Unit 4222-264 The Principles of infection prevention and control 1 Outcome 1 1. It is an employees responsibility to attend training and follow infection control policies and procedures. This includes the correct use PPE provided by the employer which generally include gloves and aprons. We must also ensure all equipment used is cleaned promptly to avoid cross contamination. Employees should also not wear jewellery as it can carry many

Unit 2 Principles of Personal Development in Adult Social Care Setting

750 words - 3 pages Unit 2 1.1 Below is a list of some of the legislations that are relevant to adult social care. These make up ‘standards’ to follow for good practice. * Care Standards Act 2000 * Domiciliary Care Regulations 2002 * Health and Safety at Work Act 1974 * Manual Handling Operations Regulations 1992 * Management of Health & Safety at Work Regulations 1999 * GSCC Codes of Practice for social care

Principles of Marketing Assignment

1527 words - 7 pages ., iiconstruction firms – lumber used to build houses, decks 2. Reseller Markets a. Consist of intermediaries including wholesalers and retailers that buy finished goods and resell for a profit. Physical characteristics are not changed in products handled. Most products are sold through this market first unless sold directly to consumers. b. Wholesalers purchase products to resell to retailers, other wholesalers, producers, governments, and

Sources Of Finance Unit 2

1040 words - 5 pages Sources of Business Finance ----------------------- |Finance method |Explanation |Benefits |Drawbacks | |Owner’s Funds |Business owners often have to use their|Savings are a good source of finance |There is always risk

Beth A Grillo - It540 Management Of Information Security - Assignment - Unit 2

297 words - 2 pages Unit 2 Assignment: Security Policy Implementation Beth A. Grillo, MHA, CPC-A July 19th, 2016 IT540-01: Management of Information Security Dr. Kenneth Flick Kaplan University Table of Contents Unit Two Assignment: Security Policy Implementation 3 Part 1: Step 29 3 Part 1: Step 36 3 Part 3: Step 33 4 Part 3: Significance of Strict Password Policy 5 Reference 6 Unit Two Assignment: Security Policy Implementation Part 1

Principles of Corporate Finance How to Calculate Present Values Richard A. Brealey Stewart C. Myers Franklin Allen Slides by Matthew Will & A. Gledson de Carvalho Mcgraw Hill/Irwin Copyright © 2003 by...

2876 words - 12 pages Principles of Corporate Finance How To Calculate Present Values Richard A. Brealey Stewart C. Myers Franklin Allen Slides by Matthew Will & A. Gledson de Carvalho McGraw Hill/Irwin Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved 3- 2 Topics Covered Valuing Long-Lived Assets PV Calculation Short Cuts Compound Interest Nominal and Real Rates of Interest (inflation) Examples McGraw Hill/Irwin

Pttls Assignment 4 Principles of Assessment

2386 words - 10 pages elements they may have failed to demonstrate for an indication of understanding giving the assessor the opportunity to provide a grade. 1.2 Define the key concepts and principles of assessment. The key concepts and principles of assessment include: * Fairness * Reliability * Validity * Current * Safe The assessment must be fair, this will begin by ensuring that the assessment process is suitable for all students, it

Assignment 201 Principles of Communication in Adult Social Care Settings

742 words - 3 pages Task A – Short Answer Questions Ai Describe two methods of verbal communication other than one-to-one conversation. Clear speech in order to help people to understand what you are saying. Speak clearly, don't cover your mouth with your hands or turn away from the person. Language and words which involves thinking carefully about the words you are going to use with the individual. Your choice of words should be appropriate to the person

Five Forces Model of Airline Industry

1644 words - 7 pages analysis whether any of the forces pose a threat to industry profits or provide an opportunity to increase profitability. Your analysis should be based on the economic principles outlined in the course. You can select any industry you like. Some suggestions include: * Airlines * Toiletries and cosmetics * Clothing * Banking and finance * Automotive assembly About the assignment: In this course we will

International Business Finance

865 words - 4 pages Task Brief 2 – Written Assignment Module Title: | International Business Finance | Assessment Title: | Written Assignment | Individual/Group: | Individual | Weighting: | 70% | Submission Date: | week 24 | Instructions To Students For Submission Of This Coursework Task Details: This task takes the form of an essay and constitutes 70% of overall assessment for the module. You are required to choose ONE of the

Related Essays

Personal Finance Assignment 2

1825 words - 8 pages assignment's questions. Use complete sentences unless the question says otherwise. You will have more than one day to complete an assignment. At the end of each day, be sure to save your progress. Review Lesson 4 of the Course Overview for instructions about turning in your assignments. Assignment 2: Financial Planning (25.0 points) 1. Describe one short-term goal that you have and at least one thing you will need to do in order to

International Finance Market – Assignment #2

702 words - 3 pages International Finance Market – Assignment #2 (Q. 1) Assume today’s settlement price on a CME EUR futures contract is $1.3140/EUR. You have a short position in one contract. Your performance bond account currently has a balance of $1,700. The next three days’ settlement prices are $1.3126, $1.3133, and $1.3049. Calculate the changes in the performance bond account from daily marking-to-market and the balance of the performance bond account

Principles Of Finance Essay

982 words - 4 pages free, which means we should pay extra money for the fund raised. For debt finance of capital, we should pay the interest of loan; for equity finance of capital, we should pay dividend. Hence, when utilizing the money borrowed, we have to ensure that the return rate achieved is higher than the cost of capital. 1 M1038091, 1103809077 Principles of Finance , 1103809069 , 1103809060 QUESTION 2: TIME VALUE OF MONEY Why does the

Bus 401 Principles Of Finance Essay

735 words - 3 pages Present and Future Values, and Expected Returns BUS 401 Principles of Finance Instructor: February 29, 2016 Present and Future Values, and Expected Returns Critically reflect on the importance of present and future values. This week started rough for me but while reviewing the material for this week’s lesson I learned the importance of the present value (PV) and future value (FV). PV and FV are related in a sense