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Essay / Research Paper Abstract
This 16 page paper examines different issues concerned investment. The paper outlines the use and value of different concepts, including different types of risk, the Capital Asset Pricing Model, what is meant by the beta, the importance of the time value of money, the use of net present vlaue and internal rate of return calculations and how they compare. The bibliography cites 11 sources.
Page Count:
16 pages (~225 words per page)
File: TS14_TEfinaceqs.rtf
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Unformatted sample text from the term paper:
when investing in stocks and shares. In this question we will look at risk types and the use of the capital asset pricing mode in terms of risk as well
as the role of the beta. There are generally accepted as to types of risk; Non diversifiable risk, or undiversifiable is risk
that cannot be avoided by diversifying the portfolio of investment. These are risks that will impact on the entire classes of assets or liabilities. This type of risk is also
known as systematic or market risk. The converse is diversifiable risk, also known as unsystematic risk or specific risk. This type of
risk is a risk that is more specific to single company, an industry, a market or even a specific economy or country. These risks can be reduced with a portfolio
of investments spread across a broad range of investments. If we look at many of the models that have been developed they
consider the role of different types of risk, for example, Capitals Asset Pricing Model (CAPM) looks at the way in which specific risk is reflected in a share price, but
does not allow for market risk as this impacts on all shares. CAPM looks to the role of diversifications. We will look at this before looking at CAPM in more
detail The principle of diversification looks at the two kinds of risk; systematic and specific risk (Howells and Bain, 2003). Specific risk is that which is not easily diversified away.
These are the risks that impact on a single company or sector, such as changes in company management or particular events, such as strikes. These are risks that can be
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