Answer:
a. Command Economy
Explanation:
In a communist political system, the emphasis is on the general well being of society at large. Public needs and wants are prioritized over individuals' needs. In a communist political system, factors of production are owned by the public through the government.
A command economy is an example of the communist political system. In a command economy, the government makes all the economic decisions. It produces goods and services with public interests as the motive for engaging in economic activities. In command economies, serving the public is prioritized over profits.
Answer:
d. bA < 0; bB = 0.
Explanation:
The possible answers that best describes the historical betas for A and B is bA < 0; bB = 0 because an average annual return for stock B is stable and constant, its beta would be zero. An average annual return for stock A is higher once market’s average annual return is lower or lesser in which therefore indicates that its beta is negative.
Answer:
The answer is: D) As they are generally defined, money market transactions involve debt securities with maturities of less than one year.
Explanation:
Money market transactions involve the trading of financial instruments with high liquidity and short-term maturities (usually less than one year). The financial instruments traded include; treasury bills (T Bills), commercial papers issued by companies and certificates of deposit (CDs).
The degree of operatingleverage is calculated by the formular
(sales - variable cost) / (sales - fixed cost - variable cost).
In the given question,
sales = $2,000,000
variable cost = $1,100,000
fixed cost = $750,000
The degree of operating leverage is (2,000,000 - 1,100,000) / (2,000,000 - 750,000 - 1,100,000) = 900,000 / 150,000 = 6.
Therefore, the degree of operating leverage is 6.
Answer:
Stock Y is undervalued because the reward-to-risk ratio for Stock Y is higher than the SML
Stock Z is overvalued because the reward-to-risk ratio for Stock Z is lower than the SML
Explanation:
From the question,
It is given:
FOR STOCK Y
Stock expected return = 14.7%
Stock beta = 1.4
risk-free rate is 5.2%
The Reward-to-risk ratio is given by the difference between the stock expected return and risk free rate divided by the stock beta.
Therefore
Reward-to-risk ratio for stock Y = (14.7% - 5.2%)/1.4
= 6.79%
FOR STOCK Z
Stock expected return = 8.7%
Stock beta = 0.7
risk-free rate is 5.2%
Therefore
Reward-to-risk ratio for stock Z = (8.7% - 5.2%)/0.7
= 5%
FOR SML
market risk premium = 6.2%
Risk rate = 5.2
Therefore
Reward-to-risk ratio for SML = (6.2%)/6.2 - 5.2
= 6.20%
Stock Y is undervalued because the reward-to-risk ratio for Stock Y is higher than the SML
Stock Z is overvalued because the reward-to-risk ratio for Stock Z is lower than the SML
