Question: Why should stock betas and expected returns be related while
Why should stock betas and expected returns be related, while no such relationship exists between stock standard deviations and expected returns?
Answer to relevant QuestionsWhy is the risk-based approach the best method for estimating stocks expected return? Refer to Figure and answer the following questions. a. What return would you expect on a stock with a beta of 2.0? b. What return would you expect on a stock with a beta of 0.66? c. What determines the slope of the line in ...What factors account for the popularity of the pay-back method? In what situations is it often used as the primary decision- making technique? Why? In almost every example so far, firms must decide to invest in a project immediately or not at all. But suppose that a firm could invest in a project today or it could wait one year before investing. How could you use NPV ...Why is using the cost of equity to discount project cash flows inappropriate when a firm uses both debt and equity in its capital structure?
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