1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
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.

You might be interested in
Economic growth will reduce the future real GDP of an economy. expand the production possibilities of an economy. increase an ec
nikklg [1K]

Answer:

The correct option is B. expand the production possibilities of an economy.

Explanation:

Economic growth can be defined as the increase in an economy's production of economic goods and services, often compared from one period of time to another. It can be measured in any of the following:

  • Nominal or real (adjusted for inflation) terms.
  • Gross National Product (GNP)
  • Gross Domestic Product (GDP), etc.

Contributors to economic growth include:

  • Increases in capital goods.
  • Increase in labor force.
  • Technology.
  • Human capital.

In simplest terms therefore, economic growth is used to refer to an increase in the aggregate production in an economy.

5 0
3 years ago
On October 10, the stockholders’ equity of Sherman Systems appears as follows.
aniked [119]

Answer:

Sherman Systems

1. Journal Entries

                                                        Debit            Credit

a)  October 11:

Treasury Stock                            $68,000

Additional Paid-in Capital         $224,400

Cash                                                                     $292,400

To record purchase of 6,800 shares at $43 per share.

b) November 1:

Cash                                          $71,050

Treasury Stock                                                 $14,500

Additional Paid-in Capital                                $56,550

To record sale of 1,450 treasury shares at $49 per share.

c) November 25:

Cash                                       $203,300

Treasury Stock                                                  $53,500

Additional Paid-in Capital                                $149,800

To record sale of 5,350 treasury shares at $38 per share.

2. Revised Equity Section of Sherman Systems' Balance Sheet as at October 11:

Common stock at“$10 par value,

 90,000 shares authorized, issued, and outstanding $ 900,000

Paid-in capital in excess of par value, common stock        81,600

Treasury Stock                                                                    (68,000)

Retained earnings                                                           1,008,000

Total stockholders' equity                                            $1,921,600

Explanation:

1. Additional Paid-in Capital:

Balance on October 10       $306,000

Treasury Stock                   ($224,400)

Balance on October 11        $81,600

2. Treasury Stock is a contra account to Common Stock.  It represents the purchase of its own shares by a company.  There are two methods for accounting for treasury stock.  One is the par value method, where the adjustments for above or below par value are made in the Additional Paid-in Capital account.  The other method is the costing method, where the adjustments for above or below par value are made in the Treasury stock.

3. The equity section prepared above is limited to the October 11 transaction.  The transactions occurring on November 1 and 25 were not required by the question.

4.  The remaining shares of the treasury stock reissued on November 25 is equal to 6,800 - 1,450 = 5,350 shares.

3 0
3 years ago
An attractive industry is one that is characterized by high entry barriers, suppliers and buyers with strong bargaining power, l
lord [1]

Answer:

False.

Explanation:

An attractive industry are not one that is characterized by high entry barriers, suppliers and buyers with strong bargaining power, low threats from substitute products, and low rivalry among firms.

An industry is defined by a group of firm that produce good and service, which are close subtitute and bargaining power of supplier are not considered as entry barrier to a firm in the open market. Industry with high fixed cost can pose high degree of rivalry among firm.

5 0
3 years ago
Giving consumers larger quantities at a low price would help taco bell regain _____.
lisov135 [29]
The answer that best fits the blank provided above is this: A COMPETITIVE ADVANTAGE. When we say competitive advantage, this is when this fast food restaurant gains that position that is ahead of the rest. This is because of their low prices for larger quantities. Hope this helps.
4 0
3 years ago
What is the difference between absolute advantage and comparative advantage?
Yuliya22 [10]
Comparative advantage<span> refers to the ability of a party to produce a particular good or service at a lower opportunity cost than another.Hope you like:)</span><span>
</span>
6 0
3 years ago
Read 2 more answers
Other questions:
  • The Dot Corporation has changed its year-end from a calendar year-end to August 31. The income for its short period from January
    15·1 answer
  • Why is net income lower than gross income?
    9·1 answer
  • Which of the following statements about a company's strategy is true? A company's strategy is mostly hidden to outside view and
    14·1 answer
  • The following transactions are July activities of Bill’s Extreme Bowling, Inc., which operates several bowling centers.
    7·1 answer
  • Which of the following is NOT a capital component when calculating the weighted average cost of capital (WACC) for use in capita
    12·1 answer
  • Jonah and Elias are participants in a research study. One task involves reading an ambiguous story, which participants can inter
    13·1 answer
  • The Tax Reform Act of 1986 eliminated the deductibility of interest payments on consumer debt (mostly credit cards and auto loan
    12·1 answer
  • Question 8 of 10
    12·1 answer
  • In a planned economy, prices of commodities are controlled by _________.
    11·2 answers
  • A stock index spot price is $1,287. the zero coupon interest rate is 3.8%. what is the potential arbitrage profit if the 6-month
    12·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!