College Essays-What is a corporation’s market capitalization and what is its p-e ratio? What is the fundamental value theory of stock prices? Explain the rationale behind equation.
Assume that one of your assets is a risk free asset. Show that that the expected return on the risky asset can be written as the risk free rate plus a risk premium. Be sure to explain why the risk premium is positive (so explain why the covariance term is negative). Compare this expression for the expected return with the expression from the capital asset pricing model.
What is a corporation’s market capitalization and what is its p-e ratio? What is the fundamental value theory of stock prices? Explain the rationale behind equation.
What is the Gordon Model and what are its assumptions? Use this model to discuss the determinants of the price-earnings ratio in the long run.
