Investors need to know how much risk they have to take to confidently expect a certain percentage return. Likewise, managers want to know what return shareholders require so that they can decide how to meet those expectations.
Respond to the following in a minimum of 175 words:
- Select 2–3 of the topics below and discuss how they each influence financial decisions regarding risk and return:
- The capital asset pricing model (CAPM)
- The constant–growth model
- Compute forward-looking expected return and risk
- Risk premiums
