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zhuklara [117]
3 years ago
9

We have the following CAPM E(Ri) = .06 + .08 Beta; a) If Stock X has a beta of 2, what is the required rate of return? b) If we

form a portfolio that is invested 40% in Stock X and 60% in the risk free asset, the expected rate of return on that portfolio? What is the beta of that portfolio? Stock Z has a beta of 1.5 and an expected return of 15%. Is at a good buy? d)Construct a portfolio of Stock X and the risk free asset which has a beta of 1.5. what is c) e) What is the expected return for this purpose?
Business
1 answer:
sergiy2304 [10]3 years ago
4 0

Answer:

Please kindly go through explanation for the answers.

Explanation:

A)The required return if Beta is 2 = 0.06+0.08*2 =0.22

B)Here Rf = 0.06

Expected return of the portfolio = 0.4*22% + 0.6*6% =12.4%

since beta of Rf = 0,the expected beta = 0.4*2 = 0.8

C)Beta is nothing but systematic risk of a security in comparing to the market. In this case stock z having beta of 1.5 which is less than beta of stockX i.e 2. and expected return is 15%.so stockz is offering lower return at lower risk. If the investor is a risk averse its a good buy.

D) let W be portion of stock X.

Then w*2 + (1-w)*0 = 1.5

W = 1.5/2 =0.75

to construct a portfolio which has a beta of 1.5 we have to invest 75% of our money in stock X and remaining in risk free asset

E) expected return = 0.22*.75 +0.25*0.06 = 16.5% + 1.5% = 18%

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On January 1, 2016, Woodstock, Inc. purchased a machine costing $40,000. Woodstock also paid $1,000 for transportation and insta
VikaD [51]

Answer:

B. $6,000

Explanation:

The computation of the annual depreciation expense under the straight-line method is shown below:

= (Original cost - residual value) ÷ (useful life)  

= ($41,000 - $5,000) ÷ (6 years)  

= ($36,000) ÷ (6 years)  

= $6,000

The original cost is computed below:

= Purchase value + transportation and installation cost

= $40,000 + $1,000

= $41,000

8 0
3 years ago
Your favorite ice cream travels from the producer, who manufacturers the product, through several other organizations before arr
malfutka [58]

This set of organizations called Marketing channel

Explanation:

A marketing channel is used to move the control of goods from either the point of origin to the place of purchase by individuals, organizations and acts. The way goods meet the customer, the end-user, is however known as a sales channel.

Marketing channels allow organisations to increase their scope and profits. Each communications platform, though, offers a different visibility and output ratio, so that it can be combined together. Current delivery structures–like manufacturer, wholesaler and seller–or versions that include one or two parts, can be part of marketing networks.

For example, companies such as Dell and Avon prohibit wholesalers and retailers from marketing to customers with their own stores and salespeople.

5 0
3 years ago
You and your spouse are in good health and have reasonably secure jobs. Each of you makes about $40,000 annually. You own a home
chubhunter [2.5K]

Answer:

$63,000

Explanation:

One of the four methods of determining insurance if the DINK method which means Double income with no kids.

To estimate the value of the insurance using this method , the sum of  , mortgage , car loans and personal debt is divided by two and added to the funeral expenses

Mortgage - 100,000

Car loan - 11,000

Personal debt - 2000

Credit card - 3000

Total = 116,000

Insurance = (116,000/2) = 58,000

Funeral expenses - 5,000

=63,000

5 0
2 years ago
A customer has invested a total of $10,000 in a nonqualified deferred annuity through a payroll deduction plan offered by the sc
Blababa [14]

Answer:

On $6000 amount customer be taxed

Explanation:

given data

total invest = $10000

current value = $16000

to find out

On what amount customer be taxed

solution

we know customer is invest here total $10000 and

current value is now $16000

so we can say that here payment non qualified deferred, annuity  after tax

so tax are paid of earning

so earning =  current value - invest

earning = 16000 - 10000

earning = $6000

so on $6000 amount customer be taxed

3 0
2 years ago
Bradley's Copiers sells and repairs photocopy machines. The manager needs weekly forecasts of service calls so that he can sched
Mkey [24]

Answer:

Explanation:

exponential smoothing alpha = 0.5

formula = Previous demand x Alpha + previous forecast x (1 - alpha)

26   32   40   27    30

26  26  29  34.5  30.75

week 2 forecast

26x0.5 + 26x0.5 = 26.

week 3 forecast

32x0.5 + 26x0.5 = 29

use the same procedure for week 4 and week 5

week 6

30x0.5 + 30.75x0.5 = 30.375

Demand Forecast for week 6 = 30.38

5 0
3 years ago
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