Your boss at the ABC Securities Firm would like the analysts of the firm to use the Fama & French Three Factor Model for determining security pricing. What are the advantages and disadvantages of using this model versus the CAPM or the Arbitrage Pricing Model within a securities firm?

What assumptions and information are used to construct the CML as compared to the SML? 

Identify the five factors that impact the price of an option according to the Black-Scholes Option Pricing Model. If each decreases, how does that impact the price of the option? Briefly explain why in each case. 

In what scenario(s) might a market participant buy a call option on a stock? Why would someone want a call option?

How would each of the following change the AFN necessary. Explain your answers?

The dividend payout ratio is decreased

The firm decides to pay all suppliers on delivery rather than a 30-day delay.

The firm's profit margin increases due to lower costs.

The firm negotiates a pay increase with its workers' labor union.

How would each of the following impact the after-tax cost of debt, the cost of equity, and the WACC? You should have 3 answers for each item. 

The corporate tax rate decreases.

The firm uses more debt.

The firms expands into a relatively stable market area.

Investors become more risk averse.

Compare and contrast gambling and investing. 

What are the moral implications investors should consider and how might these impact an investor's choices? Please use at least two credible sources when answering this question. 

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1 The Fama French Three Factor Model is an extension of the CAPM that incorporates additional factors such as size and value While the CAPM only considers market risk the Fama French model considers t... View the full answer