Answer:
The risk free rate is 3.325%
Explanation:
The required rate of return or cost of equity of a stock can be calculated using the CAPM. The CAPM estimates the required rate of return of a stock based on three factors- risk free rate, stock's beta and the market risk premium. The equation of required rate of return under CAPM is,
r = rRF + Beta * (rM - rRF)
Where,
- rRF is the risk free rate
- rM is the return on market
- (rM - rRF) gives us the risk premium of market
We already have the values for r, Beta and rM. Plugging in these values in the formula, we calculate the rRF to be,
Let rRF be x.
0.1185 = x + 1.24 * (0.102 - x)
0.1185 = x + 0.12648 - 1.24x
1.24x - x = 0.12648 - 0.1185
0.24x = 0.00798
x = 0.00798/0.24
x = 0.03325 or 3.325%
Answer:
E. $40.68
Explanation:
The computation of the stock worth today is shown below:
= (Dividend in year 1 ÷ 1 + required rate of return^number of years ) + (Dividend in year 2 ÷ 1 + required rate of return^number of years) + (Dividend in year 3 ÷ 1 + required rate of return^number of years) + (Dividend in year 3 ÷ 1 + required rate of return^number of years) × (1 + growth rate) ÷ (required rate of return - growth rate)
= $1.2 ÷ 1.14 + $1.5 ÷ 1.14^2 + $2 ÷ 1.14^3 + $2 ÷ 1.14^3 × (1 + 10%) ÷ (14%-10%)
= $40.68
We simply applied the above formula
Answer:
Sprawl
Explanation:
Sprawl can be defined as the situation where an urban settlement expands into nearby country area at the edge of a city .
Factors that lead to sprawl are population and income growth, low cost of living , road network , unlimited use of auto, etc.
Urban sprawl is characterized by uncoordinated , haphazard,and poorly planned urban development. If not properly managed , these could lead to poor environmental conditions like air pollution ,ground level smog and car traffic.
Answer:
2. Limited supply would increase the price
Explanation:
In the given case the vendor sells in advance four thousand units for $300. While the installed capacity of the factory being to produce 1000 smartphones every month.
Expected sales being 500 units per month.
During the first few months, since the seller has already successfully sold 4000 smartphone units, high demand for the smartphones is evident.
Since the supply is limited to 1000 units only in a month and the quantity demanded being more as is evident by 4000 units being pre sold, during the initial phase, this would create a high demand.
And since the supply is limited, the seller will have to increase the price as the demand is lot more.
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