Answer: 2%
Explanation:
The Capital Asset Pricing Model (CAPM) can be used to calculate expected value as thus;
= Risk free rate + beta (Market return - risk free rate)
= 5% + (-0.3) (15% - 5%)
= 5% - 3%
= 2%
Answer:
<em>Decreasing term insurance</em>
Explanation:
Decreasing term insurance <em>is renewable life insurance with a predetermined rate of decline in coverage over the life of the policy</em>.
Premiums are generally continuous throughout the agreement, and <em>there are typically monthly or annual reductions in coverage</em>.
The idea behind the insurance maintains that certain obligations and the associated need for elevated insurance rates are declining with age.
Answer:
The company’s cost of equity is 11.51%.
Explanation:
Please find the below for detailed explanations and calculations:
The company's cost of equity need to be found is the discounted rate that will bring net present value of its projected future dividend to its current stock price.
Denote cost of equity need to be found is x.
We apply the formula to calculated the present value of growing perpetuity to find x as shown below:
[ 3 x ( 1+0.062) ] / ( x - 0.062) = 60 <=> 3.186 / ( x - 0.062) = 60 <=> x = 11.51%.
Thus, the company's cost of equity is 11.51%.
