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
Free_Kalibri [48]
3 years ago
14

Assume that a risky security pays an average cash flow of $100 in one year. The risk-free rate is 5%, and the expected return on

the market index is 13%. If the returns on this security are high when the economy is strong and low when the economy is weak, but the returns vary by only half as much as the market index, what risk premium is appropriate for this security
Business
1 answer:
ki77a [65]3 years ago
8 0

Answer:

The risk premium appropriate for this security is 4%.

Explanation:

The returns vary by only half as much as the market index which means that the security half as risky as the market.

The risk-premium for the security should be half of the market risk premium.

Market risk premium is calculated by = Expected return on the market - Risk free rate

Market risk premium = 13% - 5% = 8%

The risk premium on the security would be 8% / 2 = 4%

You might be interested in
Which trade bloc was created to encourage free trade and economiccooperation between Canada, Mexico, and the United States?
Vsevolod [243]

Answer:

B. NAFTA

Explanation:

North American Free Trade Agreement (NAFTA) is a regional agreement between the Government of Canada, the Government of the United Mexican States, and the Government of the United States of America that created a free trade zone.

NAFTA administers the mechanisms stipulated in the Treaty to resolve commercial disputes between national industries or the governments of the party countries in a timely and impartial manner.

8 0
3 years ago
Read 2 more answers
Eight years ago you purchased an asset for $100,000 that has yielded a nominal capital gain of $30,000. If you sold the asset to
xz_007 [3.2K]

Answer: $8,400

Explanation:

Tax liability for a year is computed on the nominal capital gain as of that year not the inflation-adjusted gain. As such, should the asset be sold today, the capital gains tax of 28% will be computed on the capital gain of $30,000 in the following manner;

= 28% * 30,000

= $8,400

5 0
3 years ago
Hickory point amusement park sells admission tickets for $50 per person for one visit. variable costs are $15 per visitor and fi
Kay [80]
First, calculate for the total operating cost of the park through the equation,

   TC = TV + TF

where TC is the total cost,
     TV is the total variable cost which is equal to the product of the variable cost per visitor and number of visitor, and
     TF is the total fixed cost. 

Substituting the known values,
    TC = ($15)(1,750,000) + $60,000,000 = $86,250,000

Then, the total revenue is the product of the cost of ticket and the number of visitors.
     TR = ($50/visitor)(1,750,000 visitors) = $87,500,000

Subtracting the two values will give us an answer of $1,250,000.

ANSWER: $1,250,000
4 0
3 years ago
Frank has just completed a study in which he gave a survey to each of 7,000 employees and their supervisors in a large bank. His
vovikov84 [41]

Answer:

The declaration is mostly accurate or correct.

Explanation:

  • Task success can be induced by work satisfaction. But that could also be accurate the opposite way round, i.e. work success affects employee satisfaction.
  • The inference reached here does not specify which incident seems to be the reason and which one is the trigger's consequence. A significant direct connection between the two can not be identified. Other than that, there could be other variables that may control the two variables.
8 0
3 years ago
MC algo 3-13 Equity Multuiplier Use the following information to answer this question Windswept, Inc. 2017 Income Statement ($ i
Helga [31]

Answer:

The answer is Option D. 1.68 times

Explanation:

The formula for equity multiplier is:

Equity Multiplier = Total assets ÷ Total stockholder's equity

In 2017:

Total stockholder's equity = Common stock + Retained earnings

Total stockholder's equity = $2890 + $700 = $3590

Total assets = $6,015

Now, putting these values in the above formula, we get,

Equity multiplier = $6,015 ÷ $3,590 = 1.68 times

5 0
3 years ago
Other questions:
  • During the current year, Martinez Company disposed of two different assets. On January 1, prior to their disposal, the accounts
    13·1 answer
  • At the beginning of the month, Bobcat Boards and Skis received $800 in advance for future services to be performed. At the end o
    13·1 answer
  • What three activities are typically involved in the production planning process
    9·2 answers
  • Two of the characteristics of useful information are: a. flexibility and durability. b. clarity and confidentiality. c. redundan
    10·1 answer
  • What does a fractional reserve banking system mean?
    12·2 answers
  • A hotel and conference center at a holiday destination can cater for a maximum of 540 tourists and conference attendees per mont
    14·1 answer
  • Assume France and Mali can both produce grain and dates, and that the only limited resource is the farming labor force, meaning
    5·1 answer
  • Select the correct answer. What is the standard lettering height of lowercase letters when used in combination with uppercase le
    7·1 answer
  • What is stock exchange?​
    7·2 answers
  • How good are we in business?
    10·2 answers
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!