Notes On Finance And Finance Theory Essays
INSTRUCTOR: Mark Franich
Assessment 1 – Case Study (Individual)
The role of finance is explained through the analyzing of financial to distinguish the different of finance theories. Finance theory including studying the different ways via individuals raise funds and businesses, spend those funds in the most profitable ways, and invest the excess in portfolios that reap the best return while keeping in check the risk factor.
Therefore, the biggest challenges that finance faced is how to invest the funds to generate the required returns. The goals to be achieved from investing vary from individuals to institutions. The decision ultimately filters down to whether to invest in individual securities, evaluating each in isolation. According to portfolio approach, they need to evaluate individual securities in relation to their contribution to the investment characteristics of the whole portfolio.
In the case study that follows, we will illustrate a number of reasons why a diversified portfolio perspective is important through the lenses of MPT (modern portfolio theory)
Modern portfolio theory (MPT) is a theory of finance to maximize portfolio expected return for a given amount of portfolio risk, or equivalently minimize risk for a given level of expected return, by choosing the weights of various assets after due diligence. (Anonymous)
In other words, Modern…