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lubasha [3.4K]
3 years ago
15

Consider the multi-factor APT with two factors. The risk premiums on the factor 1 and factor 2 portfolios are respectively 5% an

d 3%. Stock A has a beta of 1.4 on factor 1, and a beta of 0.5 on factor 2. The expected return on stock A is 14%. If no arbitrage opportunities exist, the risk-free rate of return is __________.
A) 5.0%
B) 5.5%
C) 6.0%
D) 6.5%
Business
1 answer:
Llana [10]3 years ago
6 0

Answer:

Option (B) 5.5%

Explanation:

Data provided in the question :

Factor             Risk premium

Factor 1               5%

Factor 2              3%

Beta of stock A on factor 1 = 1.4

Beta of stock A on factor 2 = 0.5

Expected return = 14%

Now,

Expected return

= Risk free rate + (Beta of factor 1 × Risk premium of factor 1) + (Beta of factor 2 × Risk premium of factor 2)

or

14% = Risk free rate + (1.4 × 5%) + (0.5 × 3%)

or

14% = Risk free rate + ( 7% + 1.5% )

or

Risk free rate = 5.5%

Hence,

Option (B) 5.5%

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On January 1, 2021, Frontier World issues $40.6 million of 8% bonds, due in 15 years, with interest payable semiannually on June
kolbaska11 [484]

Answer:

The issue price of the bond is $44,330,000

Explanation:

The issue price of the bond can be computed using the pv formula in excel,which is given as =-pv(rate,nper,pmt,fv)

rate is the semi-annual yield to maturity on the bond which is 7%/2=3.5%

nper is the number of coupon payments the bond would make before maturity,which 15 years multiplied by 2=30

pmt is the semi-annual interest payment of the bond i.e 8%/2*$40.6 million=$1.624 million

The fv is the face value of the bond repayable at maturity which is $40.6 million

=-pv(3.5%,30,1.624,40.6)

pv=$44.33 million

4 0
3 years ago
Specialists in which field assess and mitigate workplace hazards, such as issuing ear protection to workers in factories with hi
ira [324]

Answer: Industrial Hygiene

Explanation: Specialists in industrial hygiene are also known as occupational hygienists. They serve to analyze, identify, research and measure key elements to industrial hygiene which are biological, chemical, physical and ergonomic (including workplace hazards or stresses) that can cause sickness, impair health, or cause significant discomfort in workers. To do this, they help in spotting these conditions and assist in eliminating or controlling them using appropriate measures.

8 0
3 years ago
You have just turned 30 years​ old, have just received your​ MBA, and have accepted your first job. Now you must decide how much
igor_vitrenko [27]

Answer:

Find attached

Explanation:

The present value of $97,000 per year after retirement for 35 years is computed thus:

=-pv(rate,nper,pmt,fv)

rate is the plan rate of return of 6.5%

nper is 35 years(years after retirement)

pmt is the amount required per year

fv is not applicable is taken as zero

=-pv(6.5%,35,97000,0)=$1,327,634.80  

The amount needed in the account at retirement is the future value of the plan.

Regular yearly payment into the plan is =pmt

=pmt(rate,nper,-pv,fv)

=-pmt(6.5%,35,0,1327634.80)=$ 10,703.74

The percentage of income that must be contributed is found in the attached

Download xlsx
8 0
3 years ago
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Kipish [7]

Answer:

Option E (Compromising) would be the correct choice.

Explanation:

  • A conflict mediation method of consensus attempts to discover a reason to reasonably pleasing parties and from both sides of the debate.
  • When it becomes more necessary to optimize a compromise than for the conclusion to always be perfect, a deadline is fast approaching, even at such an ongoing crisis, because you need a workable measure only for the moment, such style might be suitable to be using.

The other choices aren't relevant to the situation presented. Because otherwise, that is the right answer.

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Question 6 of 22:
shusha [124]

Answer:

Socratic app

Explanation:

it will help you

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