Question
The capital asset pricing model (CAPM) suggest that, the
cost of equity is a trade-off between :Solution
Unsystematic risk is the risk related to a particular company and this type of risk which can be eliminated by the investor through diversification of its investment, However systematic risk is market risk which includes Interest rate change, Inflation, Policy change etc. and is un-diversifiable and is measured through the Beta of the stock in the CAPM model. An investor undertakes risk by investing in the stock of a company in expectation of higher return. Higher risk is associated with greater probability of higher return and lower risk with a greater probability of smaller return. This trade-off is assumed by CAPM model also in the cost of equity.
What does the term "Vasudeva Kutumbakam" mean?
What is the process for eligible investors, other than FPIs, to invest in specified securities under the Fully Accessible Route (FAR)?
A pharmaceutical company introduces a new life-saving drug with no close substitutes. The company has a patent on the drug, giving it a monopoly in the ...
What is the maximum age to contribute under the Atal Pension Yojana?
The limit to which a firm or company can withdraw from the sanctioned working capital limit is called:
How many Infrastructure Investment Trusts (InvITs) were registered at the end of the period 2023-24, as per SEBI Annual Report 2023-24?
What is the investment limit for Foreign Portfolio Investors (FPI) in government securities (Gsecs) as announced by the RBI for the fiscal year 2024-25?
Which is the mandatory process of identifying and verifying the client's identity when opening an account and periodically over time?
What type of products does IIBX propose to introduce in the future?
What is the limits for FPI investment in corporate bonds for FY 2022-23 ?