Individual Stock and Market Portfolio. At this stage, we are going to discuss the relationship between the returns on an individual stock and the market portfolio. Individual Stock and Market Portfolio Characteristic Line The pairs of returns can be plotted in the figure. The line passing through the observations is the line of best fit. This line helps in describing the … [Read more...] about Individual Stock and Market Portfolio
Finance
Measuring Expected Returns
Measuring Expected Returns Measuring Expected Returns. Returns from security consist of income in the form of dividend or interest plus change in capital. Total returns consist of all price changes and income received during a specific interval. Future returns are the meaningful ones for decision made today. An important use of expected return is to compare value across asset … [Read more...] about Measuring Expected Returns
Yield to Maturity-YTM and Yield to Call-YTC
Yield to Maturity-YTM and Yield to Call-YTC Yield to Maturity-YTM and Yield to Call-YTC Yield to Maturity-YTM Yield to maturity (YTM) is the most widely used measure of return on the bond. It is the compounded rate of return an investor expects to receive from a bond purchased at the current market price which he holds till maturity. On the other hand, it may be termed as an … [Read more...] about Yield to Maturity-YTM and Yield to Call-YTC
General Expressions of Bond Returns
General Expressions of Bond Returns. Bond Yields and Prices: Bond returns can be calculated in many ways though they are prefixed. The followings are general expressions of bond returns which are usually found in the securities markets. General Expressions of Bond Returns Coupon Rate It is the fixed annual interest rate affixed on the face of the bond and is calculated on … [Read more...] about General Expressions of Bond Returns
Beta and its Characteristics
Beta and its Characteristics. [ Beta ] - In finance, the beta (β or beta coefficient) of an investment indicates whether the investment is more or less volatile than the market. In general, a beta less than 1 indicates that the investment is less volatile than the market, while a beta of more than 1 indicates that the investment is more volatile than the market. Volatility is … [Read more...] about Beta and its Characteristics
On Price Earning Ratio – Most Widely Used Tools for Stock Selection
On Price Earning Ratio. Price earning ratio is the more widely used method of estimating stock price. PE ratio / Price Earning Ratio is one of the most widely used tools for stock selection. It is calculated by dividing the current market price of the stock by its earning per share (EPS). A stock is said to be worth some multiple of its future earnings indicating that an … [Read more...] about On Price Earning Ratio – Most Widely Used Tools for Stock Selection
Difference between Money Market and Capital Market
Difference between Money Market and Capital Market. Money Market can be defined as financial instruments with high liquidity and very short maturities are traded. Basically used by participants as a means for borrowing and lending in the short term, from several days to just under a year. Money market is treated as a safe place due to the highly liquid nature of securities … [Read more...] about Difference between Money Market and Capital Market
Difference between Systematic and Unsystematic Risk
Difference Between Systematic and Unsystematic Risk. Before identifying the differences between systematic risk and unsystematic, we should have a clear understanding of these mentioned terminologies. However, they are defined as below: Difference Between Systematic and Unsystematic Risk Systematic risk Non-diversifiable risk is called systematic risk. It is the portion of … [Read more...] about Difference between Systematic and Unsystematic Risk
Systematic Risk and Unsystematic Risk – Meaning and Components
Systematic Risk and Unsystematic Risk. All investors must know the difference between systematic and unsystematic risk because it will help them to take effective investment decision making. In a broader sense, all types of risk can be categorized into two types; one is a systematic risk which is the non-diversifiable risk and the other is an unsystematic risk or non-systematic … [Read more...] about Systematic Risk and Unsystematic Risk – Meaning and Components
Vocabulary associated with Option
Vocabulary associated with Option. The will use exercise the option only if it is profitable, otherwise, the option can be thrown away. Followings are the vocabulary associated with the option: Vocabulary associated with Option Strike price: The fixed price specified in the option contract at which the option holder can buy or sell the underlying asset can be defined as a … [Read more...] about Vocabulary associated with Option