Business Assignment Example | Topics and Well Written Essays - 750 words

Business - Assignment Example In the model, when the expected returns do not meet the expected returns, then the investment should not be undertaken. For this reason, Capital Asset Price Model focuses on price and investment. Arbitrage Pricing Theory is a model that bases its idea that returns of an asset can be predicted using the relationship that exist between the asset and the common risk factors. This theory also defines the price where an asset that is not well priced is likely to be. The model is always viewed as a substitute to the capital asset pricing classical. For this reason, Arbitrage Pricing Theory is a model that has more elastic assumption requirement (Hodrick, Ng and Song Mueller, 76). Multi-Factor Model of Risk and Return is a financial model based on multiple factors. The multiple factors occur during its computation when explaining the market phenomenon and equilibrium’s asset prices. The factor can be used in explaining either an individual securities or a portfolio of securities. The model achieves such objective by comparing two or more factors in analyzing relationship between variables and the resulting performance of the securities. Capital Asset Price Model is a model that describes the relationship that occurs between the expected returns and the risks that are involved. On the other hand, Arbitrage Pricing Theory is a model that which is based on the idea that returns of an asset can be predicted using the relationship that exist between the asset and the common risk factors. The multi-factor model is based on multiple factors during its computation when explaining market phenomenon and equilibrium asset prices. This is an international bond that is issued in a foreign country whose value is stated in their respective currency. Eurobonds are issued by international organization and categories according to the currency in