Exam questions Essay Example | Topics and Well Written Essays - 500 words - 2

Exam questions - Essay ExampleFurther, a portfolio company having high guess may financially endanger the financial output of a company having miniscule risk. Portfolio analysis should include the influence of risk on the companys gifts (Livermore, 1998, p. 584). CAPM is used to determine the relationship between risk and portfolio returns. In terms of question 1b, the Capital Asset Pricing Model (CAPM) is used to determine the issuing of the risks on the returns. The CAPM model includes the risk free rate of return portion of the asset return. The CAPM is used to determine the expected capital asset return. The CAPM analysis includes a risk-free rate. The CAPM includes a risk premium and a market premium (Semmler, 2011, p. 106). The portfolio CAPM formula is shown in the following diagramE(Rp) = P1R1 + P2R2+ PnRnFurther, the formula is used to whether the average return on a portfolio of stocks is positively related portfolios beta data. The limitations include a wrong proxy is c hosen. Another limitation is that the financial economists had not find a fool-proof they that explains why investors demand premiums for investing in low price/earnings for converting such concepts into risk premium estimations (OByrne, 2001, p. 180).In terms of question 2a, thither are several motives for taking over another company. First, the economies of scale theory dictates that come entities or corporations takeover other companies in order to increase revenues. The full revenue of two companies will normally be higher than the revenue generated by all companies, given that the total sales of each company or equity is similar, under the synergy principle. Second, some companies takeover other companies in order to acquire the other companys current and prospective node database. Third, takeovers allow the new owner to acquire the expertise of the acquired company (Nuchtern,