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Essay / Research Paper Abstract
This 17 page paper answers a set of 23 questions asked by the student concerning intentional investment. The paper defines and explains a range of terms, such as beta, options, hedging and CAPM, along with their use. Other issue include the taxation and the use of dividends in the US, how international investments may impact on investment portfolios, the use of agency ratings, different forms of risk, debts and bonds. The bibliography cites 1 sources.
Page Count:
17 pages (~225 words per page)
File: TS14_TEdefques.rtf
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Unformatted sample text from the term paper:
of volatility, the higher the figure the higher the volatility. A figure of one means that the risk/volatility of the share is the same as a risk free investment, if
the figure is two, this means there is twice the risk three means three times the risk. Zero is no risk at all, as such this may be applied to
cash held it the time. However, the beta is not always the best measure of risk, and can be impacted by a range of factors. For example, in
a falling are there will be more higher figures, in a climbing market more lower figures. Where there are shares that are less frequently trades these will not have the
required level of trading to give a fair beta and as such will be more biased towards volatility, purely do to the lack of trading. To understand the beta
we can look at how it is used. The equation we will use is that which looks at what a required rate of return is, which will include the use
of the beta in terms of assessing the risk premium to be included in that calculation. The equation is Ks = Krf
+ B ( Km - Krf). Here Ks is the rate of return required, Krf is the risk free rate, usually measured with government bonds, B is the beta
and Km is the expected return of the stock market. This shows us that the beta may be used as a tool to help calculate expected investment returns.
2. If the beta is a measure that is easily skewed then investors may look for other was of measuring risk. The size of a company to some is an indicator.
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