Discuss the difference between the top-down and bottom-up approaches. What is the major assumption that causes the difference in these two approaches?
Answer to relevant QuestionsWhat is the benefit of analyzing the market and alternative industries before individual securities?Would you expect the risk premium for an investment in an Indonesian stock to be the same as that for a stock from the United Kingdom? Discuss your specific reasoning.What would be the value of the bond in Problem 1 if you required an 11 percent rate of return?What P/E ratio would you apply if you learned that SDC had decided to increase its payout to 50 percent? Some observers contend that it is harder to estimate the effect of a change in interest rates on common stocks than on bonds. Discuss this contention.
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