The following points highlight the three main types of fundamental valuation of securities in a company. The types are:- 1. Valuation of Convertible Bonds/Debentures 2. Valuation of 'Rights' 3. Valuation of Bonds. Type # 1. Valuation of Convertible Bonds/Debentures: Convertibles enjoy the benefits of both debt (initially) and equity (later). The terms of conversion will decide the pricing of these [...]
In valuation of investments, one has to consider his assets in the portfolio as a part of his total investments. In considering the portfolio, not only returns are to be considered as in the case of single investments but their risks also. Two plus two will not make it four in the aggregation of risks, as shown by famous author [...]
The following points highlight the four important theories of CAPM. The theories are:- 1. Random Walk Theory 2. Trend Walk Theory 3. Capital Asset Pricing (CAP) Theory 4. Modern Portfolio Theory. 1. Random Walk Theory: This theory holds that no one can predict the prices of shares based on the past or historical trends. As the market is assumed to [...]