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olga55 [171]
3 years ago
13

The Inferior Goods Co. stock is expected to earn 13% in a recession, 7% in a normal economy, and lose 6% in a booming economy. T

he probability of a boom is 20% while the probability of a normal economy is 55% and the chance of a recession is 25%. What is the expected rate of return on this stock?
Business
1 answer:
Natalka [10]3 years ago
8 0

Answer:

Ans. The expected rate of return on the Inferior Goods Co. stock is 5.90%

Explanation:

Hi, you just have to multiply the expected earnings by the probability of occurance of a certain event and then add up all the products. Here is the information all organized to be processed.

Item                  Prob Earn

Booming           20% -6%

Normal           55% 7%

Recession   25% 13%

Ok, now let´s calculate the expected rate of return.

ExpectedReturn=(0.2*(-0.06))+(0.55*0.07)+(0.25*0.13)

ExpectedReturn=-0.012+0.039+0.033=0.059

So the expected rate of return of the stock is 5.90%

Best of luck.

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Answer and Explanation:

According to the scenario, computation of the given data are as follow:-

                              Bank Reconciliation Statement

Particular                                                  Amount ($)

According to the bank statement cash balance 112,675

Add - 30,November deposits, not recorded by bank 12,200

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Less - outstanding checks -$41,840

Total Balance 78,535

According to the company’s record cash balance 66,935

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Total Balance 78,535

According to the Company’s Record Cash Balance

= Company’s Indicated November Balance + Total Cash Deposits - Written Totaled  

= $81,145 + $293,150 - $307,360

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Journal Entry

On Nov 30  

Cash A/c        Dr.$14,225

 To Interest receivables A/c   $7,000

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(Being receipts of cash is recorded)

On Nov 30

Accounts receivables A/c      Dr. $2,500

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3). According to the analysis,  the cash should be reported $78,535 if balance sheet is prepared on 30 November,2019.  

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Last year, taxpayer had a $10,000 nonbusiness bad debt. Taxpayer also had an $8,000 short-term capital gain and taxable income o
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Answer:

True

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According to the IRS, nonbusiness bad debts are debts that don't fall into any of these three categories:

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