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Kaylis [27]
2 years ago
5

American Paper Company has a beta of 1.2. The risk-free rate is 6 percent and the required return on the market is 14 percent. T

he required rate of return on the security is
Business
1 answer:
Lynna [10]2 years ago
3 0

American Paper Company has a beta of 1.2. The risk-free rate is 6 percent and the required return on the market is 14 percent. The required rate of return on the security is:

  • -15.6%
  • -13.2%
  • -22.0%
  • -22.8%

<h3>What Is the Security Market Line?</h3>

The security market line (SML) is a line drawn on a chart that serves as a graphical representation of the capital asset pricing model (CAPM)—which shows different levels of systematic, or market risk, of various marketable securities, plotted against the expected return of the entire market at any given time.

Its Also known as the "characteristic line," the SML is a visualization of the CAPM, where the x-axis of the chart represents risk (in terms of beta), and the y-axis of the chart represents expected return. The market risk premium of a given security is determined by where it is plotted on the chart relative to the SML

The formula for plotting the SML is:

Required return = risk-free rate of return + beta (market return - risk-free rate of return)

Learn more about SML on:

brainly.com/question/15877803

#SPJ4

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Current operating income for Bay Area Cycles Co. is $74,000. Selling price per unit is $120, the contribution margin ratio is 30
NeX [460]

Answer:

1. 6,944 units and $833,333.33

2.  $1,080,000 and  22.83%

Explanation:

The computations are shown below:

1. Break-even point in units

= (Fixed expenses ) ÷ (Contribution margin per unit)  

where,  

Contribution margin per unit = Selling price per unit × contribution margin ratio

= $250,000 ÷ $36

= 6,944 units

Break-even point in sales

= (Fixed expenses ) ÷ (Contribution margin ratio)  

= $250,000 ÷ 30%

= $833,333.33

2. For margin of safety and margin of safety ratio:

Margin of safety = Expected sales - break even sales

where,

Expected sales = (Operating income + fixed expense) ÷ (contribution margin ratio)

= ($74,000 + $250,000)

= ($324,000) ÷ (30%)

= $1,080,000

So, the margin of safety would be

= $1,080,000 - $833,333.33

= $246,667

Margin of safety ratio = Margin of safety ÷ total sales

                                      = $246,667 ÷ $1,080,000

                                      = 22.83%

3 0
3 years ago
Which resource can you use to view business or suppliers divided into different categories?
bagirrra123 [75]

Answer:

yellow pages

Explanation:

6 0
3 years ago
The common stock of the C.A.L.L. Corporation has been trading in a narrow range around $125 per share for months, and you believ
Bezzdna [24]

Answer:

The price of a 6-month call option on C.A.L.L. stock is $13.52

Explanation:

According to the given data we have the following:

P = Price of 6-months put option=$10.50.

So = Current price=$125

X = Exrecise price=$125

r = Risk free interest rate= 5%

T = Time 6 months = 1/2

In order to calculate the price of a 6-month call option on C.A.L.L. stock at an exercise price of $125 if it is at the money, we would have to use the formula of put-call parity as follows:

C=P+So- (<u>   X   )</u>

              ( 1+r)∧T

C=$10.50+$125-(<u>$125   )</u>

                            (1+0.05)∧1/2

C=$135.5-121.98

C=$13.52

The price of a 6-month call option on C.A.L.L. stock is $13.52

3 0
3 years ago
Detailing's cost formula for its materials and supplies is $2,060 per month plus $12 per vehicle. For the month of August, the c
OverLord2011 [107]

Answer:

Planning budget amount = $3,052.00

Explanation:

<em>The planning budget is als0 known as the </em><em>fixed budge</em><em>t . It is the budget prepared for the original level of activity intended or  planned for. As it's name implies, it is used for  planning purpose.</em>

For the month of August, the planning budget

= $2060 + ($12 × 86)

=  $3,052.00

Planning budget amount = $3,052.00

5 0
3 years ago
Read 2 more answers
Consider the following two investment alternatives. First, a risky portfolio that pays a 12 percent rate of return with a probab
zaharov [31]

The risk premium on the risky investment is 5%

<h3>What is investment?</h3>

The dedication of an asset to achieve an increase in value over time is referred to as investment. Investment necessitates the sacrifice of a current asset, such as time, money, or effort. The goal of investing in finance is to generate a return on the invested asset.

Income investing is an investment strategy that focuses on constructing an investment portfolio that is specifically designed to generate regular income. The income investing strategy's sole goal is to generate a consistent stream of income.

The type of investor you are and how you should make investments are determined by your investing personality. Your investing personality is essentially your financial risk profile, which takes into account a variety of factors such as age, financial history, circumstances, and investment objectives.

To know more about investment follow the link:

brainly.com/question/25790997

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5 0
1 year ago
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