Discuss the assumptions, approach, estimation, benefits, limitations, and criticisms of Arbitrage Pricing Theory (APT)

Q: Differentiate between price risk and reinvestment risk.

A: Price risk is the risk of decline of the price of the investment or an asset after the underlying…

Q: What are the assumptions of efficient market hypothesis? Discuss.

A: The efficient market hypothesis (EMH) is a hypothesis theory which states that share prices reflect…

Q: What is the difference between the ratios that use the market price and the other ratios? Why might…

A: Ratio analysis mistreatment money statements includes accounting, securities market, and management…

Q: The hypothesis that market prices reflect all publicly-available information is called efficiency in…

A: Efficiency of stock market is determined by the effect of information whether publicly available or…

Q: Explain the effect of issuance cost on firm value.

A: There are issues cost associated with debt and equity that has impact on  value of firm.

Q: Explain the logic of the liquidity premium theory of the term structure

A: Investors prefer to have the securities which are highly liquid and have short term maturity period…

Q: What does it mean for markets to be efficient? What are the differences in the degree of efficiency,…

A: The markets are considered to be efficient if the information related to various aspects that create…

Q: Define semistrong form of market efficiency

A: Answer: Efficient market is one where the market price constitutes a balanced estimate of…

Q: Briefly explain the difference between liquidity, solvency, and profitability analysis.

A: Financial ratios are the metrics used to evaluate the liquidity, profitability, solvency and overall…

Q: Explain the sequential payout tranche structure?

A: Sequential payout tranche structure In this type of structure interest payments are received by…

Q: Arbitrage pricing theory is model developed to be used by:

A: Arbitrage is the practice of taking positive expected return from overvalued or undervalued…

Q: Assume you want to test the Efficient Market Hypothesis (EMH) by comparing alternative trading rules…

A: Efficient Market Hypothesis(EMH) refers to the theory which states that the share prices should…

Q: Define the following terms, using graphs or equations to illustrate youranswers wherever feasible:…

A: APT                                                                              It is a model based…

Q: What is an anomaly to an asset pricing model? For example explain what is pricing anomaly to CAPM…

A: An anomaly is referred when there is a considerable difference between the values computed by using…

Q: behavioral view” of market efficiency

A: The Efficient Market Hypothesis is usually predicated on the belief that traders and investors…

Q: discuss the respective theorists, their arguments against and for dividend policies

A: Firm issued various securities to arrange the fund for the business and pay return on it. Dividend…

Q: Critically discuss the efficient market hypothesis

A: Efficient Market Hypothesis: The market is effective in handling data . Markets are correctly and…

Q: Define alternative trading system (ATS)

A: An alternative trading system (ATS) is not an exchange-regulated, yet a position that suits its…

Q: Discuss three forms of market efficient market hyphothesis and discuss whether this fact violates…

A: Efficient market hypothesis states that the prices of the shares reflect whole information and there…

Q: Explain purchasing power parity

A: The formula to compute purchasing power parity:

Q: What is an alternative trading system (ATS)?

A: Alternative trading systems are generally helpful for people like investors & professional…

Q: Explain how behavioural finance is related to market anomalies.   **Please provide website link or…

A: Behavioral finance is a study in finance which examines the investor's behavior in making investment…

Q: What is market approach measurement?

A: The market approach is just like comparing one set of assets with another both having the same…

Q: iven the information below, calculate the reward-to-risk ratio implied by the CAPM pricing model.

A: The risk-reward ratio determines how much reward is there for risk of  every dollar.

Q: What does the usage of technical analysis mean for the theory of market efficiency?

A: Market efficiency:- Market is said to be ‘efficient’ only if the price of every security in the…

Q: Define Black-Scholes option pricing model

A: Assumptions of Black-Scholes option pricing models: There is no dividend during the lifetime of the…

Q: Explain CMO Price Behavior and Prepayment Rates?

A: The question is based on the concept of Collateralized Mortgage Obligations (CMO) , interest rate…

Q: Give some examples of the market-value ratios?

A: Market value ratios may include various types of ratios which indicate the value of company’s share.…

Q: Which of the following statements is correct? Select one: O A. Expectations theory combines…

A: The term structure of interest rates represents the relation between the interest rates and bonds…

Q: The underlying assumptions of technical analysis are that A.price move in predictable patterns B.…

A: Technical analysis aims at predicting the price movements of securities by using market statistics…

Q: did hedging reduce volatility of the realized price?Answer Yes or No and explain

A: Hedging can be referred as a strategy that is used by the investors to reduce the risk associated…

Q: What are the assumptions of Option-pricing models?

A: There are two option pricing models they are: Binomial model option pricing model Black Scholes…

Q: The central issue of efficient market concens: O regulations O structure O participants O…

A: Market efficiency is the ability of markets to process the information quickly and generate the…

Q: Define Arbitrage Pricing Theory (APT)

A: Arbitrage is the method of making profit from the temporary change in the cost of shares by buying…

Q: How can I explain the rationale behind the Arbitrage Pricing Theory (APT) model, and discuss its…

A: The Arbitrage Pricing Theory (APT) model is the asset pricing model that considering the difference…

Q: Briefly explain Purchasing Power Parity?

A: Purchasing Power Parity (PPP) is a theory of exchange rate determination. Purchasing power parity is…

Q: Briefly explain law of one price with respect to the arbitrage pricing theory.

A: Arbitrage Pricing Theory: It is the multi-factor model that expresses the relationship between…

Q: Briefly explain the difference between the CAPMand the Arbitrage Pricing Theory (APT)

A: The Capital Asset pricing model assists investors in computing the expected return on investing in a…

Q: Explain the term Market Timing strategies?

A: THE MARKETING TIMING STRATEGIES IS GIVEN BELOW-