Ratio Analysis
Valuations
Charting Technique
- It determines Rate of return of a Security after considering its risk
- It provides the relation between RISK and RATE OF RETURN for a particular asset
- It is used to calculate required rate of return of a risky asset
- Ra = Expected Rate of Return
- Rf = Risk free rate of Return
- Beta - Denotes about Risk
- Rm = Market rate of return
- We can classify risk in two
- UnSystematic Risk associated to Asset Specific Risk
- Systematic risk associated with RISK TO ALL ASSETS
- BETA calculates SYSTEMTIC RISK
- If Beta is > 1, asset risker than Market
- If Beta is < 1, Asset is less risky than Market
Capital Asset Pricing Model
Ra = Rf + Beta(Rm-Rf)
Beta = Risk Premium
Beta RISK Classification:
(i)Systematic Risk (ii) Unsystematic Rick
