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Expected return under sharpe model = Alfa+Beta*market return+unexplained error
AFM
answered on 13-Jun-25 11:32
Sir, I understand that Beta × Market Return gives the expected return for a specific security. Then why do we add Alpha again? [Video Time Stamp: 12:22]
latest answer
Yes exactly
Manikyam
CA Final
★ 0
3
292
All 4 scenarios violating the 20% rule
AFM
answered on 12-Jun-25 22:03
Company's maximum acceptable drop in NPV = 20% of Normal NPV: 20% of ₹11,28,120=₹2,25,624 So, minimum acceptable NPV (with risk): ₹11,28,120−₹2,25,624=₹9,02,496 In cases (a), (b), and (c), a 10% adverse change causes NPV to drop >20% → Not acceptable In case (d) (poor economy), NPV = −₹88,596 → Well beyond acceptable risk So with all 4 scenarios violating the 20% rule, the project is clearly rejected. What if only 2 out of 4 (say, two variables or scenarios) have NPV drop > 20%, while the other 2 are within 20% — can the project be accepted?
latest answer
Depends on which negative scenario the company is most worried abt
Shinisha Rose R
CA Final
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1
204
Consideration of Beta as 1
AFM
answered on 12-Jun-25 23:13
Sir, Could you explain why the Beta value is taken as 1 for Market and 0 for Treasury Bill.?
latest answer
Thank you Sir.
K Vamshi
CA Final
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2
285
ILL-15 (Security valuation -Bonds)
AFM
answered on 11-Jun-25 19:10
Sir here in the question Bond Y is more coupon rate with less price than Bond X i.e 8% ,936.52. we can purchase the Required no.of bonds Y and liquidate them after 2 Years and get 100000 Can u tell about this sir
latest answer
Immunization
P.udaykumar Pasupulati
CA Final
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1
267
method 1
AFM
answered on 11-Jun-25 15:38
Following only method 1 is enough in the exam
latest answer
Yes Ideally they mention what they want If they do not chose the easiest method
Shinisha Rose R
CA Final
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1
249
Security valuation - TYK 11
AFM
answered on 08-Jun-25 09:22
Instead of using D1 for price calculation why they have used D0. Are they assuming D0 itself as D1.
latest answer
If you assume ROE 1 = PAT1 / BV 0 then what they have done is right They said that in line 1 If you assume ROE 0 = PAT 0/ BV 0 then we should follow what you are suggesting i.e compute d1
Kaushik A
CA Final
★ 3K+
1
256
Variance and Standard Deviation
AFM
answered on 06-Jun-25 15:03
Sir, if Variance is 0.056, so sqrt of that is 0.2368 i.e., 23%. In the other case if i take variance as 5.61115 in percentage terms (0.056*100), then the standard deviation was √5.61115 ≈ 2.3688(in percentage). Could you please clarify which is correct and why the standard deviation is being stated as 23%?
latest answer
When Return of share price is in % then SD is also in % but VAr is % square Best way is to remove % right at beginning and solve it just as a number and then add % at the end another way is to convert everything into decimal and then solve - I don't recommend it though Answer eventually will be same in al methods but best is to remove % and solve
Murali Thripuraboina
CA Final
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1
255
Z score
AFM
answered on 02-Jun-25 13:15
@ 2.15 it is said '1.28 SD', I do not understand how that value was arrived.
latest answer
1.28
Jayanth
CA Final
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1
390
Merger
AFM
answered on 01-Jun-25 23:04
So, here in Illustration 1, part (i), when Y gets merged into X then Y doesn't exist. Then how come we can compute post merger EPS of Y?
latest answer
Thanks for the clarification. Clear now
Dhanushree Shanmugam
CA Final
★ 3K+
2
289
Portfolio management
AFM
answered on 01-Jun-25 18:43
Explain me confidence between two stocks.. Do I have to memorize the formula.. Or it will be helpful if you can explain in simple terms
latest answer
solution
Naima Shaikh
CA Final
★ 270
3
227