Question

O Explain the following
with eramples:
(a) Arbitrage Pricing Theory
(b) Portfolio Management strategies
(c) Valuation of Preferece​

Answer 1

Answer:

a-Arbitrage pricing theory (APT) is a multi-factor asset pricing model based on the idea that an asset's returns can be predicted using the linear relationship between the asset’s expected return and a number of macroeconomic variables that capture systematic risk. It is a useful tool for analyzing portfolios from a value investing perspective, in order to identify securities that may be temporarily mispriced.

b-

Strategic Portfolio Management. Strategic Portfolio Management is about deciding where best to focus the organisation's finite resources in order to meet strategic objectives, considering the business as a portfolio of activities and making trade- offs across the portfolio.

c-The valuation of preference shares is a very straightforward exercise. Usually preference shares pay a constant dividend. This dividend is the percentage of the face value of the share. For instance, a preference share with the face value of $100 which pays 5% dividend will pay $5 in dividends