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Maksim231197 [3]
3 years ago
10

Stock Y has a beta of 1.40 and an expected return of 14.8 percent. Stock Z has a beta of .85 and an expected return of 11.3 perc

ent. If the risk-free rate is 4.85 percent and the market risk premium is 7.35 percent, are these stocks overvalued or undervalued?
Business
1 answer:
tresset_1 [31]3 years ago
4 0

Answer:

Stock Y has overvalued and Stock Z as undervalued

Explanation:

In this question, we apply the Capital Asset Pricing Model (CAPM) formula which is shown below

Expected rate of return = Risk-free rate of return + Beta × (Market rate of return - Risk-free rate of return)

For Stock Y

= 4.85% + 1.40 × 7.35%

= 4.85% + 10.29%

= 15.14%

For Stock Z

= 4.85% + 0.85 × 7.35%

= 4.85% + 6.2475%

= 11.0975%

The (Market rate of return - Risk-free rate of return) is also called market risk premium and the same is applied in the answer

As we see the expected return of both the stock So, Stock Y has overvalued and Stock Z as undervalued

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you plan to deposit $1,500 quarterly for 35 years at 7% interest, compounded monthly. how much will you have in the account in 3
VikaD [51]

After 35 years, you will have $911,053.82 in the account.

This is based on a quarterly deposit of $1,500 per year for a period of 35 years at 7% interest, monthly compounded.

Data and Calculations:

Quarterly Deposit = $1,500

Number of years = 35 years

N (# of periods) = 140 (35 x 4)

I/Y (Interest per year) = 7% (0.583% per month)

PV (Present Value)  = 0

Quarterly PMT (Periodic Payment) =  1500

P/Y (# of periods per year) = 4

C/Y (# of times interest compound per year) = 12

PMT made at the of each period

Results:

Future Value = $911,053.82

Sum of all periodic payments = $210,000.00 ($1,500 x 140)

Total Interest = $701,053.82 ($911,053.82 - $210,000)

Thus, after 35 years, the account will have a balance of $911,053.82.

Learn more: brainly.com/question/17028320

7 0
1 year ago
Rory is the CFO of McIlroy Golf Designs Inc. MGDI earned $13 million last year and maintains a 30% dividend payout ratio. The co
BaLLatris [955]

Answer:

<u>Price per share of MGDI's stock is $78</u>

Explanation:

Earnings per share=Total earnings/Shares of common stock outstanding

=(13/2)=$6.5

PE ratio=Stock price/Earnings per share

Stock price=$6.5*12

=$78.

5 0
2 years ago
Based on the article, As Middle Class Shrinks, P&amp;G Aims High &amp; Low, identify the environmental forces from among the six
Vladimir [108]

Answer:

All the above.

Explanation:

  • Based on the articles the middle-class shrinks P&G high and low are identified by the environmental factors that may impact the development of the firm in the market.

a) Social : The Social factor in the external environment of the form will be related to the firm showing the product whether it's accepted by the society at large.

b) Cultural : This aspect will focus on the moral and ethical principles of the company wants to portray.

c) Demographic : Factors related to the people and their age structures as they are customers users of the products.

d) Economic : In terms of the revenue maximization and profit motive should target with the appropriate amount.

e) Competitive : As the markets are highly competitive the demand for the product and the market values will be dependent on the company position of the product.

f) Technological has a larger and integrated role to play.

5 0
3 years ago
The company's bank reconciliation at June 30 included interest earned in the amount of $150. Complete the necessary journal entr
ehidna [41]

Answer:

Given that,

Company's bank reconciliation at June 30 included interest earned = $150

So, it must be cash must be debited and interest revenue must be credited in the accounts.

Therefore, the journal entry is as follows:

Cash A/c Dr. $150

     To Interest revenue   $150

(To record the interest revenue earned)

7 0
3 years ago
Who sets the price in a monopolistic competition?
AnnyKZ [126]

Answer:

Producers

Explanation:

Monopolistic competition is a form of market competition where different producers produce goods that are largely different from each other and can not even been used as a perfect substitute for one another.

This gives each producer the opportunity  to decide its prices and output . Prices are always set higher than the marginal costs and the consumer surplus are less compared to a perfectly competitive market , making monopoly competition an imperfect market.

7 0
3 years ago
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