The Baldwin Company currently has the following balances on their balance sheet:
1 answer:
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Answer:
B. 5.40 percent
Explanation:
Let today's price per share be $X
Total return = [ (New value + Dividend - Old value) / Old price ] *100
Old value = $24 *540 = $12,960
Next, plug in the numbers to the formula;
0.063 = [ (540X + 117 - 12,960)/ 12,960 ]
0.063 =
multiply both sides by 12,960;
0.063 *12,960 = 540X - 12,843
816.48 = 540X - 12,843
Add 12,843 from both sides and solve for X;
816.48 + 12,843 = 540X
13,659.48 = 540X
Divide both sides by 540;
13,659.48/ 540 = X
X = 25.295
Therefore, today's price per share = $25.30
Capital gains yield= (Today's price - Original price) /Original price
Capital gains yield = (25.295 -24) / 24
=0.05396 or 5.40%
Therefore, Capital gains yield is 5.40%
Answer:
a. True
Explanation:
from the CAPM formula we can derive the statemeent as true.
risk free = 0.05
market rate = 0.12
premium market = (market rate - risk free) 0.07
beta(non diversifiable risk) = 0
Ke 0.05000
As the beta multiplies the difference between the market rate and risk-free rate a beta of zero will nulify the second part of the equation leaving only the risk-free rate. This means the portfolio is not expose to volatility