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Tcecarenko [31]
3 years ago
15

The risk-free rate is 5%; Stock A has a beta of 2.0; Stock B has a beta of 1.0; and the market risk premiumis positive. Which of

the following statements is CORRECT?
A) If the risk-free rate increases but the market risk premium stays unchanged, Stock B's required return will increase by more than Stock A's.
B) If Stock A's required return is 11%, then the market risk premium is 6%.
C)If Stock B's required return is 11%, then the market risk premium is 6%.
D) Stock A's required rate of return is twice that of Stock B
Business
1 answer:
butalik [34]3 years ago
3 0

Answer:

C) If Stock B's required return is 11%, then the market risk premium is 6%.

Explanation:

In this question, we apply the Capital Asset Pricing Model (CAPM) formula which is shown below

Expected rate of return = Risk-free rate of return + Beta × (Market rate of return - Risk-free rate of return)

The (Market rate of return - Risk-free rate of return)  is also known as the market risk premium

If we take the required return is 11%, so the market risk premium would be for stock B

11% = 5% + 1 × Market risk premium

11% - 5% = Market risk premium

So, the market risk premium would be 6%

If we take the required return is 11%, so the market risk premium would be for stock A

11% = 5% + 2 × Market risk premium

11% - 5% = Market risk premium

So, the market risk premium would be 3%

Hence, the correct option is C

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Use the following information for exercises 15 to 18 LO P2 The following information applies to the questions displayed below] O
Mrrafil [7]

Answer:

            Ernst Consulting

             Balance Sheet

For the Month Ended October 31, 202x

Assets:

Cash $12,650

Accounts receivable $12,800

Office supplies $2,850

Office equipment $17,530

Land $45,940

Total assets $91,770

Liabilities and stockholders' equity:

Accounts payable $8,110

Common Stock $83,540

Retained earnings $120

Total liabilities and stockholders' equity $91,770

Explanation:

I ordered the accounts and included a couple that were missing:

  • Cash 12,650
  • Accounts receivable 12,800
  • Consulting revenue 12,800
  • office supplies 2,850
  • Land 45,940
  • office equipment 17,530
  • Accounts payable 8,110
  • Cash dividends 1,570  
  • Common Stock 83,540
  • Rent expense 3,110
  • Salaries expense 6,490
  • Telephone expense 850
  • Miscellaneous expenses 660

First we need to determine net profit for the month:

Consulting revenue 12,800

Salaries expense -6,490

Rent expense -3,110

Telephone expense -850

Miscellaneous expenses -660

net profit = $1,690

retained earnings = net profit - dividends distributed = $1,690 - $1,570 = $120

7 0
3 years ago
The adjusting entry to record accrued revenue a.differs from the journal entry to record revenue on account. b.includes a debit
motikmotik

Answer:

D.

Explanation:

To accrue means to grow or to accumulate over time. In accrual accounting, if the revenue recognition criteria are met in the current period, revenue will need to be accrued in the current accounting period even if cash will not been received until a later accounting period.

Accrued revenues is a type of account that require adjustment, to register the unrecorded revenues that have been earned and for which cash has not yet to be received.

The accrual journal entry to record the sale involves a debit to the accounts receivable account and a credit to sales revenue. If the sale is for cash, debit cash instead. The revenue earned will be reported as part of sales revenue in the income statement for the current accounting period.

It is the same for accrued revenue and for revenue on account.

8 0
3 years ago
Which of the following statements is (are) true regarding product costing?(A) Twenty cans of paint that are 25% full are equival
MrRa [10]

Answer:

B is the correct option.

Explanation:

Product costing refers to the cost incurred for creating a product. It includes the materials, labor, factory overhead and consumable production supplies. It can also be defined as the labor cost required for delivering the service and in this case, its cost also includes the costs related to compensation, payroll taxes, and employee benefits. The cost of a product on a unit basis is calculated by adding the cost of total direct labor, materials, consumable supplies and total allocated overhead divided by the total number of units.

6 0
3 years ago
In the field of health science, what characteristics are employers not looking for?
xenn [34]

Portability should be the answer

6 0
3 years ago
After an ems run, your partner suggests you write down vital signs differently than the ones obtained
SVETLANKA909090 [29]

During an EMS run and your partner instructed you and suggests you to do and write vital signs written differently than of the original record obtained, it would likely affect the treatment that could be administered in the patient. The vital signs are basic and yet they are important in a person’s data for they are a critical data and it is where medical professionals base their treatment and assessment to the patient. If this is written differently, not only will affect the treatment but it could also cause conflicts and there will be consequences to the people who are involved such as having suspended or fired in their line of work or having to have criminal charges.

5 0
3 years ago
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