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

Exam questions - Essay ExampleFurther, a portfolio political party having high risk may financially endanger the financial output of a company having miniscule risk. Portfolio analysis should involve the influence of risk on the companys returns (Livermore, 1998, p. 584). CAPM is used to coiffe the relationship between risk and portfolio returns. In terms of question 1b, the Capital Asset Pricing set (CAPM) is used to determine the effect of the risks on the returns. The CAPM model includes the risk free rate of return parting 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 figure 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 chosen. Another limitation is that the financial economists had not discovered 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, there are several motives for taking over another company. First, the economies of scale surmise dictates that come entities or corporations takeover other companies in order to increase revenues. The total revenue of cardinal companies will normally be higher than the revenue generated by all companies, given that the total gross revenue 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 customer database. Third, takeovers allow the new-fashioned owner to acquire the expertise of the acquired company (Nuchtern,