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Essay / Research Paper Abstract
This 5 page paper answer three questions set by the student. The first considers how to value Sento shares in the future and the way a discount rate can be determined and applied to a futures contract. The second part of the paper examines how different projects may be assessed for discount rates by their relative risk. The last part of the paper looks at how different types I of equities may be assess for an appropriate discount rate. The bibliography cites 4 sources.
Page Count:
5 pages (~225 words per page)
File: TS14_TEriskmeas.rtf
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Unformatted sample text from the term paper:
futures contract will always be subjective, as with any equity, it will only be worth the amount someone is prepared to pay. The influences that will determine whether the demand
will be there at a certain price also vary. If we look at Sento Corp. then we can examine some of these factors. The current price of the shares
is $2.95 per share. This is lower than at some points in the past and part of this is explained by the share split that took place in November 2003
(Yahoo Finance, 2005). If buying a future we are looking at the price we are going to be prepared to pay for the share at a set point in the
future. For the purposes of this we will assume that this is a year. If we believe that share price will be about the same in a years time we
may agree to make a purchase for the same price as it is today. However we also have to factor in the cost of the future contract and deduct this,
otherwise we are paying more for the share than we believe we would do if simply waited. The purchase of the future takes away the uncertainty. But may not give
a perceived benefit. Also, the money today is not worth the same as money in the future, and as such we may want to discount the amount to reflect this
loss of value. It is highly unlikely that the share price will be the same in twelve months time. The 52 week high was $7.09 and the 52 week
low was $2.20. This indicates there has been a great deal of movement in the share price, and that it looks like the share is going to increase in value.
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