Finance
the beta of Spock's portfolio is (.5)(.7)+(.5)(1.1) = 0.9
The beta of Kirk's portfolio is (.9)(1) + (.1)(0) = 0.9
The risk of these two portfolios is the same. Both have the same beta, which implies that they are equally risky, even though their composition is quite different.
Essentially, all securities should be priced at their fair market value, under the efficient market hypothesis. Investors should be completely ration. However, there are two possibilities to explain underpricing of assets. The first is that the investors are not entirely rational. There is certainly enough evidence to support the idea that investors behave irrationally, and the science on the subject is far from certain. So there is at least the possibility of irrational behavior leading to underpricing. Another possible explanation is that the markets are not strong form efficient. This would mean that, if the markets were weak form efficient, that they are functionally efficient but only based on having some information. There is information that exists about the company but which has not yet been priced into the stock. In this situation, the stock could be underpriced.
C. If a two-stock...
The challenge of saving for a home and getting $15,000 into a Roth IRA is the most difficult principle of goal setting. There are many challenges to saving for a down payment and also getting a significant amount into a Roth IRA. What makes this dimension of goal setting so challenging are the unforeseen events and older appliances that tend to break, and the car repairs. It's my observation that
It may also include goals concerning the attainment of education for the individual or their children. During this time the individual should establish both short-term and long-term goals (personal finance). The third step in the financial planning process concerns itself with detailing how the goals set forth in step two will be accomplished. For example, certain expenses may need to be reduced and certain investments may need to be made
16. Help Rebecca and Jay apply four steps of the smart buying process to decide whether to replace Vehicle #2. What sources of consumer information might be useful to them? According to Auto Channel the four steps are: Determine your practical needs for a new vehicle, determine your budget and stick to it, determine your emotional needs, which car or truck really makes you happy when you drive it, and
Personal Finance: Making Good Decisions Financial decisions can have lifelong implications. Before taking this class, although I had a basic understanding of how financial problems could be calculated as equations, I did not necessarily know how to make optimal decisions in the real world. Making good financial decisions requires making an intelligent risk versus reward analysis. All decisions require an economic sacrifice or have an opportunity cost. The money diverted to
In addition, liability insurance covers damage done to other's property, should the insured become legally liable for the damages. Boiler insurance was originally created to cover loss due to insureds owning a pressure boiler. However, today, boiler insurance is often more aptly renamed equipment insurance. Equipment insurance will provide coverage for mechanical breakdowns of equipment, including the cost of repairing or replacing the equipment. The equipment can include: air conditioners, hot
College Students Need Personal Finance Education Often, the twenty-first century is referred to as the "Information Age." With a few keystrokes, a large percentage of individuals on the planet is able to access incalculably large databases containing the sum of human knowledge. No longer do students have to toil for hours in paper-based libraries to complete research; most research can be attained in the home via the Internet. Furthermore, individuals can
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