Briefly explain two measures that can be used in narrowing down the expectation gap

Q: How do the Internal-Rate-of-Return Criterion relate to the PW Analysis?

A: Capital budgeting:   It is the process in which the business uses to determine which proposed fixed…

Q: Define vector error correction model for the two interest rates?

A: Vector correlation model is used to determine the direction of causality between two variables if…

Q: What is the Tolerable Error Rate?

A:

Q: What happens to the SML graph when risk aversion increasesor decreases?

A: Risk Aversion: The ability of a human being to avoid the risk and eventually reducing losses that…

Q: What are the shortcomings of the internal rate of return criterion?

A: Solution- Internal Rate of Return (IRR)-      The Internal Rate of return (IRR) is that the discount…

Q: Which are the more complex applications of rate-of-return techniques/

A: The question is based on the concept of rate of return and its application in finance

Q: Explain constant prepayment assumptions?

A: Prepayment refers to the settlement of debt before its actual due date. The model which determines…

Q: What is the Black Scholes Model?

A: Black Scholes Model is an option pricing model.

Q: Explain pure expectations theory

A: It estimates the future interest without considering the maturity risk. According to the expectation…

Q: What are the steps in computing the cost of a prediction error when using the EOQ decision model?

A: Economic Order Quantity (EOQ): Economic order quantity is the quantity of order that is purchased…

Q: Explain about the Black–Scholes model.

A: Black Scholes option pricing model is probably the most commonly used option pricing model in…

Q: The internal rate of return (IRR), despite its shortcomings, can be a useful analysis tool for…

A: IRR is the required rate of return for the project to have zero Net Present value.

Q: Why do conflicts sometimes arise between the netpresent value (NPV) and internal rate of return(IRR)…

A: The basic assumption between NPV and IRR method is the cash flows are reinvested. In the NPV method,…

Q: What is the Decreasing Returns to Scale? Can you please explain and give a definition, thank you.

A: The concept of decreasing return to scale is majorly used in production process and production…

Q: Briefly explain two measures which can be used in narrowing down the expectation gap

A: Expectation gap is the term which is defined as the gap among the users of assurance reports…

Q: Is an higher NPV better than a lower NPV and why?

A: The net present value is the difference between sums of the present value of cash inflows and…

Q: advantages and disadvantages of the scattergram method as compared to the high-low method?

A: Solution High-low method takes high level activity and low level activity and measure the total cost…

Q: three reasons for such expectation gap

A: Expectation Gap:-It is the difference between the public perception of an auditor's role and…

Q: Explain the effect of leverage on EPS and ROE and what is the break-even EBIT?

A: Leverage refers to the debt amount a company uses in order to finance its assets. EPS refers to…

Q: What key assumption underlies the pure expectations theory?

A: Pure expectations theory in finance refers to the fact that the forward rates are nothing but the…

Q: What is the difference between YTD and YoY return? Provide an example

A: In the question they have asked regarding YTD and YOY differences between them so they will be…

Q: Calculate the risk neutral probability

A: Risk neutral probability = (er*Δt - d)/(u-d) r is risk free rate. Δt is time period between each…

Q: What is the expected spot rate?

A: A spot rate is a price quoted for immediate settlement on an interest rate, commodity, security, or…

Q: The expectations gap is

A: The Answer :

Q: Explain the relationship between WACC and EVA! demonstrate by providing a complete analysis and…

A: Formula: EVA = Net Operating profit margin(NOPAT) -(Capital employed* WACC)

Q: What should be done to apply rate-of-return analysis correctly?

A: Rate of return: It can be defined as the rate of interest that has been earned by the company on the…

Q: Explain normal rate of return.

A: Rate of return: Rate of return is the return on investment. it might be a loss or profit on an…

Q: Explain risk aversion

A: Introduction: Risk can be characterized in terms of the uncertainty of future consequences resulting…

Q: When we work with the breakeven point, how important is it to understand what a decision variable…

A: The question is related to Marginal Costing. The break-even point is that level of sales at which…

Q: Explain arithmetic mean returns?

A: Arithmetic mean:It is a commonly used measure of  mean (or measure of average). Arithmetic mean is…

Q: Discuss the main difference between the single-index model and the Markowitz optimization model.

A: Single Index Model- This article is concerning the quality rating model in political economy. For an…

Q: What is hurdle rate?

A: Hurdle rate a rate usually used in capital budgeting decisions to calculate the acceptability of a…

Q: What are the advantage  of the scattergraph method over the high-low method? The high-low method…

A: Cost accounting is beneficial since it can demonstrate where a corporation spends money, earns…

Q: Explain Variation on the Preferred IRR and IRR Lookback?

A: The internal rate of return (IRR) is the measure used in the financial analysis of an investment…

Q: a. Are there Nash equilibria? If so, determine how many and state which strategies.

A: Yes, there are Nash equilibrium.

Q: Discuss the main and major difference between single index model and Markowitz optimization model.

A: The Single Index Model is an asset pricing model in which the returns on security can be interpreted…

Q: Explain Prepayment Assumptions?

A: Prepayment model : In simple words, A prepayment model is employed in banking to forecast the amount…