Capital Asset Pricing Model Essay Example for Free

Capital Asset Pricing Model Essay The capital asset pricing model (CAPM) is an important model in finance theory. CAPM is a theory or model use to calculate the risk and expected return rate of an investment portfolio (normally refer to stocks or shares). All stocks have 2 risks: Systematic Risk (also called Market Risk which affect every stocks) and Unsystematic Risk (also called Specific or Unique Risk that only affects individual stocks). To diversify unsystematic risk, we selected and combined different stocks, which are negatively correlated with one another into one portfolio. In this way risk are eliminated greatly. See diagram below. CAPM Equation The general formula used for Capital Asset Pricing Model is: re = rf + [ ß (rm rf) ] where the components are as follows: re = Expected return rate of the investment portfolio rf = Risk free rate of return ß = Beta (correlation between the shares and the market) rm = Expected market return which also means: rm rf = Market risk (systematic risk) ß (rm rf) = Risk premium *Beta is overall risk value for investing in the stock market. The higher the beta, the more the risk. CAPM Example Assume there is two Investment portfolio (stocks) or project A B. With the information given below, we can use CAPM to help us decide which to invest on. risk free rate beta expected market return A 3% 2.5 10% B 3% 1.2 10% From the beta value above, we know A is a more risky portfolio. A is 2.5 times more risky than the overall market and B is 1.5 times less risky. †¢ Expected return produce by A re = rf + [ ß (rm rf) ] re = 3 + [ 2.5 (10 3) ] = 20.5 % †¢ Expected return produce by B re = rf + [ ß (rm rf) ] = 3 + [ 1.2 (10 3) ] = 11.4 % Using CAPM formula, we calculated A produce a 20.5% expected return rate. It is higher than the overall market expected return, which is 10%. Whereas for B, the expected return rate are only 11.2% compare to market return of 10%. Base on result, A is definitely a better but if you don’t feel conformable with A’s risk or think it might not able to produce the expected return rate, then you would probably can choose investing in B. Criticisms of CAPM Although CAPM seems to be one of the most widely used methods to determine the expected return of a investment portfolio, It still have its limitation. Many had criticized on its unrealistic assumptions. †¢ Required a well-diversified portfolio Firstly CAPM works really well with a well-diversified portfolio as it accounted for systematic risk (market risk) but as seen on the graph on page 1, systematic risk is still undiversified. Therefore unsystematic risk is ignore in CAPM calculation. †¢ Beta as it main calculation components As Beta value are computed base on past one year figures so in this case CAPM assume that the future wont change. Also beta may not really reflect the actual performance of different stocks. This was question by professors Eugene Fama and Kenneth French where they looked at share returns on the New York Stock Exchange, the American Stock Exchange and Nasdaq between 1963 and 1990, they found that differences in betas over that lengthy period did not explain the performance of different stocks. The linear relationship between beta and individual stock returns also breaks down over shorter periods of time. These findings seem to suggest that CAPM may be wrong. †¢ Risk free rate of return CAPM assumes there is a risk free rate where investors can borrow or lend at this rate but it is not true in the real world. †¢ Perfect capital market exists There is no transaction cost for trading in the market and profit is non-taxable. †¢ All investor are the same CAPM assume all investors have the same expectations on the risk and expected return.

An Analysis of Overbooking and Impacts on Customer Behavior Within the

Introduction This report seeks to investigate and analyse the main characteristics of overbooking and the impacts this can have on a hotels management systems and customers. It examines the consequences of both successful and ineffective overbooking management decisions depending on the way in which it is managed and the effect this can have on the hotels profitability of the hotel. It also looks at the effect that overbooking has on customer behaviour and loyalty and legislations that have been passed in the USA. Existing research on yield management analyses’ overbooking and how this can be implemented effectively within hotels, some researchers have then expanded upon this to incorporate effects on profitability, customer service and service recovery. Secondary data was collect through journals, books, hospitality related magazines and hospitality news articles in order to gain framework for the research topic. Literature Review Companies throughout the hospitality industry a keen to implement the most successful techniques in order to make the best of their efficiency and increase their profitability and yield management, including overbooking strategies which is important in the operation of a hotel to maximise revenue and are increasingly putting these in to practise throughout the company (Hwang et al, 2009), an unoccupied room in a hotel offers a revenue opportunity, whether or not the no show customer has paid for it. Overbooking forms a part of a hotels yield management, also known as revenue management and can be defined as â€Å"the application of information systems and pricing strategies to allocate the right capacity to the accurate customers, cost and time† (Kimes et al, 2003: 30), by expanding on this term it ... ...a donnybrook.†: Hotel Management Magazine, New York. Noone, B. & Kimes, S. & Renaghan, L. (2003) â€Å"Integrating customer relationship management and revenue management: a hotel perspective†: Cornell University, Journal for Hospitality Research. Simon, J. (1968) â€Å"An Almost Practical Solution to Airline Overbooking†: London, Journal of Transport Economics and Policy. Sulistio, A. & Kyong, K. & Byya, R. (2008) â€Å"Managing cancelations and no-shows of reservations with overbooking to increase resource revenue†: Washington, CCGRID '08 Proceedings. Talluri, K. & Van-Ryzin, G. (2004) â€Å"The Theory and Practice of Revenue Management†: New York, Springer Todorov, A. & Zhechev, V. (2010) â€Å"The impact of overbooking on hotels’ operation management†: Unknown, Unknown. Vickrey, W. (1972) â€Å"Airline Overbooking: Some Further Solutions†: Journal of Transportation and Economic Policy.

P. S. I Love You Analysis

The movie I chose was P. S. I Love You. To begin with, I chose this movie because I have not seen it yet, but I have heard from my friends that it was a movie that I cannot miss out on. Reading the captions of the movies, it seemed very interesting and as soon as I was done with the movie, I gladly found it interesting. P. S. I love you had a unique plot compared to other love movies, after reading the synopsis I could automatically relate this movie with Chapter one on â€Å"Myth of the right one†. P. S. I Love You introduce its self with the daily lives of Holly Kennedy (the main character) and her husband Gerry Kennedy, a happily married couple going through their up and down stages of their marriage. Until Gerry dies of a brain Tumor, it takes Holly about a year to get over, but the movie narrates her life throughout the year. Holly and Gerry were married for 10 years and she got married at the age of 19, so we can say she married an age where she believed that Gerry was the right one and there would be no other like him. After the death of Gerry, Gerry understood that it would be hard for Holly to get over him so on his last few days before his death he writes several letters instructing her what to do as a last request. Holly received her first letter shortly after Gerry’s funeral on her 30th birthday. Gerry along with Holly’s friends are determined to to make Holly move on from the widow stage and be herself. Throughout the letters (which he had arranged for after his death) Gerry ends them by saying P. S. I Love you. The letter are supposed to encouraged Holly to move on by going out more and spending more time with her friends (Denise and Sharon), but her friends are afraid that the letters are keeping Holly tied up. In one of the final letters, Gerry arranged Holly, Denise, and Sharon, to his home town in Ireland. Once in Ireland, the girls are having fun at a local pub Gerry had recommended them to. At the pub, Holly meets a singer who strongly reminds her of her dead husband Gerry and ends up liking him, but by coincidence he happened to be one of Gerry’s best friends. Throughout the Ireland trip Holly finds out that Denise was having a baby and Sharon is getting married, so it caused Holly to emotionally relapse into herself and get depressed once again. Weeks later in New York Holly believing she was done with her letters until she received her final one from her mom when she was crying to her about how hard it was to go on without the love of her life. But in the last letter Gerry says his final good bye and tells Holly to move on and be herself and to think about what she was before she met Gerry (an Art Major). Eventually Holly finds out she has the talent to design women shoes. As Holly starts her own line of shoes we see that she gained a new confidence and it allows her to finally accept herself for what she has and for her friends to finally experience happiness. So the movie ends by Holly taking her mother to Ireland and as the film ends it shows the audience with a scene where she finally abandoned the fear of falling in love again and has opened up her life to the journey that awaits her. The Character I’m choosing in the movie to explain the problem that the character is facing is Holly. At the beginning of the Movie before Gerry died, Holly believed that he was â€Å"the one†, but then after his death, she goes on a journey that Gerry had left planned for her. Throughout the Journey Holly meets other men and fights her fear of falling in love again, believing that only Gerry was â€Å"the one†. At the end of the movie Holly learns how to accept Gerry’s death and meets a new man. If I were to choose a chapter from the book â€Å"A Daring Promise†, it would have to be the first chapter. As I was explaining throughout the whole essay, Holly is in the category of â€Å"Myth of the Right One†. She believes that there’s only one Gerry out there even after his death, until finally after a year of going through Gerry’s planned letters and other events, she finds a new man, that changed her image of â€Å"the right one†. So is there really only one right one for us? The book tells us that there isn’t such thing as one love, it’s just a myth. Based on the text, I can state that â€Å"One Love† is really a myth. There is more than just â€Å"One Love†. To obtain â€Å"One Love† both partners must always be communicating and come to agreements. In my opinion many people at first believe in only â€Å"One Love† at first because they have not had many relationships. We must come to our senses that nobody is perfect and we have to accept both the good and bad of a person. If you and your partner are willing to make sacrifices, then together you guys can make changes and have the same love for each other and being more united. If there is something I have learned from this assignment, it would be about marriage. I have never experienced a dead wife but I would assume that anyone who loves their partner would go have to go through what Holly did. Throughout the movie I also learned that getting married and losing a husband or getting divorced can affect everything around your life. When Holly was with Gerry they would always argue about when to have kids and when to move out of the apartment, but when Holly was single she lost her main balance of her life and things were pretty hectic in the beginning, until she finally had the support of her family and friends. Marriage is a great responsibility. I have also learned in class that you cannot change a person unless that person is willing to change.

The Visitation of the Gods - 4902 Words

The Visitation of the Gods Gilda Cordero-Fernando While this is not the conventional love story like the other stories here, I thought it was a good addition to this blog. Loving ones job is a love that is also noteworthy. Ones dedication and passion for his or her chosen profession is as noble as love felt for other people. Ms. Noels principles and decisions show her dedication not only to her job, but to her students, as well. This is sharply contrasted against the facade that her co-teachers are putting up and the jaded opinions of Mr. Sawit. It is a good story that is a true and unforgiving reflection of the culture in public schools and a must-read for those who are considering teaching as a profession. Perhaps its because the†¦show more content†¦Visitation was, after all, 99% impression - and Mr. Olbes, the principal, had promised to remember the teachers cooperation in that regard in the efficiency reports. The teachers of Group Two had been assigned to procure the beddings and the dishes to be used for the supper. In true bureaucratic fashion they had relegated the assignment to their students, who in turn had denuded their neighbors homes of cots, pillows, and sleeping mats. The only bed properly belonging to the Home Economics Building was a four-poster with a canopy and the superintendent was to be given the honor of slumbering upon it. Hence it was endowed with the grandest of the sleeping mats, two sizes large, but interwoven with a detailed map of the archipelago. Nestling against the headboard was a quartet of the principals wifes heart-shaped pillows - two hard ones and two soft ones - Group Two being uncertain of the sleeping preferences of division heads. Structuring the Rooms was the responsibility of the third group. It consisted in the construction (hurriedly) of graphs, charts, and other visual aids. There was a scurrying to complete unfinished lesson plans and correct neglected theme books; precipitate trips from bookstand to broom closet in a last desperate attempt to keep out of sight the dirty spelling booklets of a preceding generation, unfinished projects and assorted rags - the key later conveniently lost among the folds of Mrs. Olbes (the principals wife) balloonShow MoreRelatedPastoral Ministry1579 Words   |  7 Pageschurch. The word shepherd is the more appropriate translation for the word. The word shepherd is used at least thirteen times in the King James New Testament. B. Contrast in house calls and personal visits. - When looking at the work of the pastor, visitation plays a role in part of the pastoral ministry. Depending totally on your definition of personal visits, they could be just that†¦ to stop by for a chat or some personal matter on the pastor’s part. 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