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Nookie1986 [14]
3 years ago
13

The interest rate on short-term U.S. government bonds is 4 percent. The risk premium for any asset with a beta = 1.0 is 6 percen

t. What is the average expected rate of return on the market portfolio?
Business
1 answer:
Basile [38]3 years ago
6 0

Answer:

The average expected rate of return on the market portfolio is 10 percent.

Explanation:

The CAPM (fixed asset pricing) model describes the relationship between systematic risk and expected return on assets, especially stocks. CAPM is widely used throughout the financial community to value high-risk securities and achieve the expected returns on assets when taking into account the risk of those assets and the cost of capital.

The formula for calculating the expected return on an asset taking into account its risk is as follows:

ERi = Rf + βi (ERm - Rf)

where:

ERi = expected return on investment

Rf = risk-free interest rate = 4 percent.

βi = beta inversion =1.0

(ERm −Rf) = market risk premium = 6 percent.

ERi = 4 + 1 ×(6) =10

The average expected rate of return on the market portfolio is 10 percent.

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Answer:

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3 years ago
Paxton Company can produce a component of its product that incurs the following costs per unit: direct materials, $9.50; direct
mrs_skeptik [129]

Answer:

$7.50 per unit

Explanation:

Cost of buying from outside supplier = $33 per unit.

Relevant cost of making such component in-house = Direct materials+ Direct labor+ Variable overhead

= $9.50 per unit + $13.50 per unit + $2.50 per unit

= $25.50 per unit

Net incremental cost of buying the component = Cost of buying from outside supplier- Relevant cost of making such component in-house

= $33.00 per unit - $25.50 per unit

= $7.50 per unit

4 0
2 years ago
Prepare journal entries to record each of the following transactions of a merchandising company. The company uses a perpetual in
Mandarinka [93]

Answer:

A Merchandising Company

Journal Entries:

Nov. 5:

Debit Inventory $6,000

Credit Accounts Payable $6,000

To record the purchase of 600 units of a product at a cost of $10 per unit, terms, 2/10, n/60.

Nov. 7:

Debit Accounts Payable $250

Credit Inventory $250

To record the return of 25 defective units.

Nov. 15:

Debit Accounts Payable $5,750

Credit Cash Discount $115

Credit Cash Account $5,635

To record payment on account.

Explanation:

The journal entries show the accounts affected by each transaction.  Two or more accounts are usually affected.  One account receives value and is debited and the other gives value, and it is credited.

The trade terms 2/10, n/60 implies that a cash discount of 2% on the outstanding balance exists for early settlement on account within 10 days and the credit period should not exceed 60 days or two months.

4 0
3 years ago
Recessions are associated with lower incomes, rising unemployment, and falling profits.
kozerog [31]
<span>Recession is a period of temporary economic decline. At this time, trade and industrial activity are reduced, causing unemployment, low incoms and falling profits. Social crises, especially affecting healthcare and pension insurance schemes are common, with special negatie effect to vulnerable social populations as disabled or elderly.</span>
3 0
3 years ago
You produce a glittering crystal substance, Dementia, which looks just like a diamond, but is much cheaper. It soon takes over 7
Stells [14]

Answer:

substitute goods

Explanation:

Substitute goods -

It refers to the cheaper and better quality goods and services , which can be used in place of another product , is referred to as a substitute goods .

These goods can be better than the other one , as the goods might be easily available , lesser price , better quality , more durable , and hence has more demand by the consumers .

Hence , from the given scenario of the question ,

The correct answer is substitute goods .

3 0
3 years ago
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