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suter [353]
3 years ago
6

describe how adding a risk-free security to modern portfolio theory allows investors to do better than the efficient frontier. A

dditionally, explain how might the magnitude of the market risk premium impact people's desire to buy stocks?
Business
1 answer:
kondaur [170]3 years ago
7 0

Answer: Modern portfolio theory takes this idea even further. It suggests that combining a stock portfolio that sits on the efficient frontier with a risk-free asset, the purchase of which is funded by borrowing, can actually increase returns beyond the efficient frontier.

Risk premium is defined as excess return over risk free rate by taking extra risk. A risk-free asset has zero risk, so risk premium on these assets is zero. As risk level of investment increases, risk premium on investment also increases.

The market risk premium is the difference between the expected return on a market portfolio and the risk-free rate. The market risk premium is equal to the slope of the security market line (SML), a graphical representation of the capital asset pricing model (CAPM). CAPM measures required rate of return on equity investments, and it is an important element of modern portfolio theory and discounted cash flow valuation.

Explanation:

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g Kaye's Kitchenware has a market/book ratio equal to 1. Its stock price is $12 per share and it has 5.2 million shares outstand
Ede4ka [16]

Answer:

48.00%

Explanation:

For computing the debt to capital ratio, first we have to determine the equity value and debt value which is shown below:

Equity value = Number of outstanding shares × stock price per share

                    = 5.2 million shares × $12

                    = $62.4 million

We know,

Total capital = Debt + equity

$120 million = Debt + $62.4 million

So, the debt would be

= $120 million - $62.4 million

= $57.6 million

Now the debt to capital ratio would be

= $57.6 million ÷ $120 million

= 48.00%

7 0
3 years ago
On July 10, Boogie Footware agrees to a contract to sell 800 pair of flapper shoes for $16,000 to Twenties, Inc. On September 1,
atroni [7]

Answer:

$2,000

Explanation:

Revenue is the income generated from normal business activities. This includes allowances, discounts and deductions for sales returned.

Since Boogie and Twenties modify the agreement to reduce the price of the remaining 300 pair of flapper shoes to $10 a pair, it means that revenue to be recognized from the date of the change will be recognized at a unit price of $10.

As such if Boogie delivers 200 pairs of shoes in September,

Revenue to be recognized in the Month of September

= 200 * $10

= $2,000

5 0
3 years ago
The key factor distinguishing retailers from other members of the supply chain is that.
Airida [17]

The key factor distinguishing retailers from other members of the supply chain is that they sell to customers for their personal use.

<h3>What do you mean by customers?</h3>
  • A client is someone who purchases goods, services, products, or ideas from a seller, vendor, or supplier in exchange for money or another useful consideration.
  • This definition applies to sales, business, and economics.
  • Customers who frequently purchase from a business establish conventions that enable regular, sustained trade, which enables the business to create statistical models to improve production procedures (which alter the nature or form of goods or services) and supply chains (which changes the location or formalizes the changes of ownership or entitlement transactions).
<h3>What types of customers are there?</h3>
  • 5 different consumer types
  • New customers.
  • Impulsive buyers.
  • Angry customers.
  • Persistent customers.
  • Loyal customers.

Learn more about customers here:

brainly.com/question/13472502

#SPJ4

3 0
1 year ago
Which of the following statements is​ true? A. Each country as a whole is made better off as a result of international​ trade, b
natulia [17]

Answer:

A. because it can impact an individual

Explanation:

5 0
3 years ago
After shopping at a Cut-Price store, Dyan finds a fitness watch in her bag of purchases that she knows she did not pay for. If D
hram777 [196]

Answer:

A) conversion

Explanation:

Conversion is when someone wrongfully use property of another for their own purposes . In an action for conversion, the taking of the property may be lawful, but the retaining of the property is unlawful.

Same in this case retaining the fitness watch is unlawful to use the property which belongs to others.

5 0
3 years ago
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