Bea Moran wants to establish a long derivatives position in a commodity she will need to acquire in six months. Moran observes that the six-month forward price is 45.20 and the six-month futures price is 45.10. This difference most likely suggests that for this commodity: futures prices are negatively correlated with interest rates.
This is further explained below.
<h3>What are interest rates?</h3>
Generally, the fraction of a loan that is charged as interest to the borrower is often stated as a yearly percentage of the loan outstanding.
"lower interest rates encourage people to spend money on house upgrades"
In conclusion, Bea Moran would want to construct a long derivatives position in a commodity that she will need to buy in a little over half a year's time. Moran notes that the price of the six-month forward contract is now at 45.20, while the price of the six-month futures contract is currently at 45.10. Because of this disparity, it is quite probable that the prices of futures contracts for this commodity have an inverse relationship with interest rates.
Read more about interest rates
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Answer:
1.
r market = 0.12 or 12%
2.
r stock = 0.12 or 12%
3.
r Stock = 0.169 or 16.9%
Explanation:
The required rate of return can be calculated using the CAPM or Capital asset pricing model equation. The formula for required rate of return under this model is,
r = rRF + Beta * rpM
Where,
- rRF is the risk free rate
- rpM is the risk premium on market
- r represents the required rate of return
1.
The beta of the market is always considered to be 1. Thus, the required rate of return on market would be,
r market = 0.05 + 1 * 0.07
r market = 0.12 or 12%
2.
For a stock whose beta is 1.0, the required rate of return would be same as that for market. So, the required rate of return for a stock with a beta of 1.0 is,
r Stock = 0.05 + 1 * 0.07
r Stock = 0.12 or 12%
3.
The required rate of return for a stock with a beta of 1.7 is,
r Stock = 0.05 + 1.7 * 0.07
r Stock = 0.169 or 16.9%
Answer:
$3,800
Explanation:
The computation of the after-tax benefit is shown below:
= Annual dinner club membership cost - annual dinner club membership cost × her marginal tax rate
= $5,000 - $5,000 × 24%
= $5,000 - $1,200
= $3,800
We simply deduct her tax expense from the annual dinner club membership cost so that the accurate amount can come.
All other information which is given is not relevant. Hence, ignored it
Answer:
C
Explanation:
The answer is a tree branch breaks your bedroom window during a storm because this is covered by the homeowners insurance and not by the renters insurance
Renter’s insurance does not cover building or Structure on sites
