CAPM and the use of it Essay Example | Topics and Well Written Essays - 1500 words

CAPM and the use of it - Essay Example Capital asset pricing model delivers a very simple and easy theory. It offers an utilizable measure to calculate risk that facilitate financier to find out that how much return they are going to get for putting their funds at risk. This model mainly targets the risk averse investors. Capital asset pricing model is the widely used and mainly preferable model for risk and return used in finance. CAPM specifies the association between the risk and expected return that an investor gets on asset. This model is basically used to determine the expected required rate of return on assets and to determine the price of risky securities in the portfolio. This is the model in which securities are priced in such a manner that investors get compensation for the risk involved in the security by offering them return. Systematic risk is the market risk and the one that cannot be diversified easily or that can totally out of range to diversify away. It includes wars, an unpredictable variation in interest rates and many other macro economic factors. Unsystematic risk on the other hand involves those which can be sort out easily because this type of risk is related by means of the individual or stock an investor has in his portfolio. This is also identified as specific risk. This risk is not exposed to in general as a whole. An investor can diversify away unsystematic risk by raising the figure of stocks in his portfolio. So in technical words it can be stated that unsystematic risk does not move with the market as a whole. According to Modern Portfolio theory, it is concluded that unsystematic risk can be diversified but systematic risk still one of the troubles for the investors which cannot be ignored. So here the capital assets pricing model fully fitted and solve the problem because it is applicable for both type of risk either systematic or specific by diversifying it. CAPM itself exposed to some factors that are prevailing within capital

Case Study of Competition in Video Game Consoles Essay

Case Study of Competition in Video Game Consoles - Essay Example The early video games were simple and were not backed by sophisticated technology. In the current times, technology driven powerful consoles, pricing, wide variety in games and portability across different platforms are key elements that give leverage to the company. Indeed, though pricing of game units and games is hugely important, it is observed that advancing technology has increasingly played vital role in attracting the gamers. The next generation consoles, Xbox and Xbox 360, launched by Microsoft, have been leading game systems which have given tough competition to Sony’s PSP and PS2 systems and Nintendo’s Wii. Technology has emerged as important factor that provides gamers with unique experience and intrigues them as well as helps them to exploit their capabilities as gamers. The variety in games and appealing game titles constantly attract existing gamers as well as new ones and provide them with new ways to test their skills. Thus, firms which can provide the market with wide varieties in games that are backed by technology and relatively low cost would help become market leader in the video game industry. Answer 2 There are four chief drivers that are changing the dynamics of video games industry: demography: console technology; mobile gaming and online gaming. The first one is the widening database of gamers which have cut across age and gender. ... The next generation technology is important as fast processors, high-resolution screens and sound effect provide the gamers with high-end experience. The increasing popularity of handheld gaming devices like PSP has inspired the industry to introduce sophisticated games in the mobiles. Moreover the expanding database of mobile users is crucial factor that could provide the firms with competitive advantage in the industry. Thus, leading game providers are forging network relationships with mobile manufacturers and using the platform to maintain their leverage in the industry. The last but not the least important is the use of internet in gaming devices. The users are able to download new games and movies that significantly cuts cost of going to the market and buying games. Most importantly, use of wi-fi in the gaming devices greatly facilitates mobility and helps users to access new games even when they are outside their house. Answer 3 Microsoft, Sony and Nintendo are three big compa nies in the field of video games in US. Microsoft has been a leadership company in the area of computing and home entertainment. It has exploited its technology expertise to develop video games that would enhance user experience. The company has also used extensive marketing, especially viral marketing to advertise its video games consoles and video games. It has also tried to ensure that its first mover advantage is maintained by constantly improving its technology and giving more variety in games. Sony has used its market leadership in audio-video products, communication and IT based products to introduce video games and capture significant market share of the industry.