Answer: <em>c. The required returns on all stocks have fallen, but the fall has been greater for stocks with higher betas.</em>
Explanation:
The Capital Asset Pricing Model formula can be applied to this question.
The formula is,
Er = rF + b( rM - rF)
Where
Er is the required return
rF is the risk free rate
b is beta
rM - rF is the market premium.
Now looking at that formula, you can tell that if market premium falls, the required return would fall as well.
However, for stocks with larger betas, they would drop more spectacularly because they would be coming from higher values to lower.
Take a stock with beta 4 vs one with beta 5 for instance.
Assume that Market premium went from 6% to 3% and a risk free rate of 3%.
<u>Beta 5 stock </u>
When market premium is 6,
= 3% + 5 (6%)
= 33%
When market premium is 3,
= 3% + 5(3%)
= 18%
<u>Beta 4 stock </u>
When market premium is 6
= 3% + 4 (6%)
= 27%
When market premium is 3
= 3% + 4 (3%)
= 15%
Notice how the stock with beta 5 fell by 15% while the stock with beta 4 fell by 12%.
Answer: The entrepreneur assumes the risk of the business
Explanation:
An entreprenuer is a person that's bears the risk and controls the other resources such as the land , labour and the capital.
Also, we should note that the entrepreneur either makes a profit or loss. The difference between the small business owner and the entrepreneur is that the entrepreneur assumes the risk of the business
Answer: to historical performance or budget
Explanation:
A profit center in a business is a division that is able to make revenues independently and contribute to the revenue of the entire business. In evaluating the performance of a profit center manager, it is best to compare the performance to a budget or their historical performance.
This is because profit centers engage in different businesses and so their revenue making style will be unique. Some profit centers will make more than others because of the goods they produce or the way they produce it. It is therefore best to compare a profit center to an internal measure such as the budget and historical performance.
If the profit center exceeds either of these then they are performing well.
Answer: potentially higher income
newer equipment and facilities
Explanation:
First and foremost, we should note that a feature of a for-profit healthcare facility is that it is owned by the individual and not the government. Private citizens set up hospitals in order to generate profit.
The advantages of working for a for-profit healthcare facility are potentially higher income. This is due to the fact that it's for profit motive, hence, there's possibility of getting a higher income unlike working for the government. Also, newer equipment and facilities can be gotten as well.