The increase in stock risk has lowered its value by 16.09%.
<h3>What does market price mean?</h3>
- The price at which a good or service can currently be bought or sold is known as the market price.
- The forces of supply and demand determine the market price of a good or service; the price at which the quantity supplied and demanded are equal is the market price.
<h3>What is current price and market price?</h3>
- Market value is another name for the current price. It is the last traded price for a share of stock or any other security.
According to the question:
- If the security's correlation coefficient with the market portfolio doubles (with all other variables such as variances unchanged), then beta, and therefore the risk premium, will also double. The current risk premium is: 13% - 5% = 8%
The new risk premium would be 16%, and the new discount rate for the security would be: 16% + 5% = 21%
If the stock pays a constant perpetual dividend, then we know from the original data that the dividend (D) must satisfy the equation for the present value of a perpetuity:
Price = Dividend/Discount rate.
26 = D/0.13.
D =26 x 0.13.
D = $3.38.
At the new discount rate of 21%, the stock would be worth:
$3.38/0.21.
= $16.09.
The increase in stock risk has lowered its value by 16.09%.
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Answer:
$160,000
Explanation:
Calculation of the car dealership's profit
Using this formula
Profit= Total revenue- Amount Spend
Where,
Total revenue=$300,000
Amount Spend=$140,000
Let plug in the formula
Profit =300,000-140,000
Profit =160,000
Therefore the car dealership's profit will be $160,000
Answer:
A. Movement on the PPC
B. Rightwards / Outwards shift of PPC
C. Less Concavity of PPC
Explanation:
Production Possibility Curve is combination of two goods that an economy can produce, given resources & technology (efficient utilisation).
- It is a downward sloping curve as more of one good can be produced by sacrifising other good, same resources & technology.
- It is concave curve because of increasing marginal opportunity cost, i.e increasing amounts of a good to be sacrifised to gain additional amount of other good, as resources are not equally efficient in production of both goods.
- Points on PPC reflect full utilisation, points under PPC reflect under utilisation, points above PPC are unattainable.
a) A disagreement between persons favouring more domestic welfare spending or national welfare spending : Is just an issue of reallocation of same resources, technology. So, PPC doesn't change & there can only be movement on the PPC (more of one good, less of other good)
b) An increase in population : leads to increase in human resource & hence the PPC shifts outwards / rightwards as the production potential of economy rise with more human resource.
c) Technological change that make resources less specialised : would reduce resources' efficiency gap in production of two goods. So, Marginal Opportunity cost reduces & hence the PPC becomes less concave.
Answer:
3.05%
Explanation:
According to Pure Expectation Theory, the future short term interest rates are actually the forward rates.
Mathematically,
(1 + r2,0)^2 = (1 + r1,0)^1 * (1 + r1,1)^1
Here,
r2,0 is the rate of interest for 2 year treasury security from today
r1,0 is the rate of the interest for 1 year treasury security from today
r1,1 is the rate of the interest for 2 year treasury security from Year 1
By Putting Values, we have:
(1 + r2,0)^2 = (1 + 0.04)^1 * (1 + 0.021)^1
(1 + r2,0)^2 = 1.06184
By taking square-root on both sides, we have:
(1 + r2,0) = 1.0305
r2,0 = 3.05%
