Preferred stock is a special type of stock that pays dividends and does not come with voting rights. Preferred stock combines aspects of both common stock and bonds in one security, including regular income and ownership in the company. Key Notes: Preferred stock is a different type of equity that represents ownership of a company […]
The money market refers to trading in very short-term debt investments. At the wholesale level, it involves large-volume trades between institutions and traders. At the retail level, it includes money market mutual funds bought by individual investors and money market accounts opened by bank customers. Money Market focuses on debt instruments only the maturities of […]
Capital market theory makes reference to multiple forms of analysis that aim to predict the value of securities and the flow of supply and demand in the market. Types of Capital Market Theory The capital market theories and pricing models included in the study are Portfolio Theory, the Efficient Market Hypothesis (EMH), the Capital Asset Pricing Model […]
Capital Market Theory tries to explain and predict the progression of capital (and sometimes financial) markets overtime on the basis of the one or the other mathematical model. Capital Market Theory tells the investor how assets should be priced in the capital markets under the light of portfolio theory. The theory that describes the pricing […]
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from the issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a year divided by the face value of […]
The Capital Asset Pricing Model (CAPM) describes the relationship between systematic risk, or the general perils of investing, and expected to return for assets, particularly stocks. It is a finance model that establishes a linear relationship between the required return on investment and risk. What is CAPM? The Capital Asset Pricing Model (CAPM) is a model that […]
CML vs SML – Key Difference. SML and CML are two very crucial concepts in finance. SML stands for Security Market Line, while CML’s full form is Capital Market Line. Both SML and CML relate to risk and return on investment. The CML is a line that is used to show the rates of return, which […]
The security market line (SML) is a visual representation of the capital asset pricing model (CAPM). SML is a theoretical representation of the expected returns of assets based on systematic or non-diversifiable risk. The concept of beta is central to the CAPM and the SML. The beta of a security is a measure of its systematic risk, […]
The capital market line (CML) represents portfolios that optimally combine risk and return. It is a theoretical concept that represents all the portfolios that optimally combine the risk-free rate of return and the market portfolio of risky assets. What is CML / Capital Market Line? The Capital Market Line is a graphical representation of all the portfolios […]
Common stock is the fundamental ownership equity of a company. It is a security that represents ownership in a corporation. The investor in common stock thus occupies a position directly comparable to that of the owner of a firm or factory. Common stock bears the main burden of the risk of the enterprise and also […]
