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snow_lady [41]
3 years ago
5

You have been managing a $5 million portfolio that has a beta of 1.25 and a required rate of return of 12%. The current risk-fre

e rate is 5.25%. Please answer the following three questions: What is the market risk premium from the CAPM
Business
1 answer:
olga nikolaevna [1]3 years ago
7 0

Answer:

1.

Required rate = risk free rate + beta (market rate – risk free rate)

.12 = 0.0525 + 1.25(X – 0.0525)

1.25X – 0.065625 = .12 – 0.0525

1.25X = 0.0675 + 0.065625

X = .1333125/1.25

 = 0.1065

Marker risk premium = market rate – risk free rate

  = .1065 – 0.0525

   = 0.054 (A)

2.

Beta of portfolio = (5000000/5500000)* 1.25 + (500000/5500000)* 1

= 0.90909* 1.25 + 0.090909* 1

= 1.136 + 0.090909

= 1.2273

3.

Required rate = risk free rate + beta (market rate – risk free rate)

= 0.0525 + 1.2273* 0.054

= 0.0525 + 0.06627

= .11877 or 11.88%

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According to the given statement Lindsey holt purchased preferred stock.

The correct option is B.

<h3>What is the preferred stock?</h3>

Preferred stock, which is a component of share capital and is commonly referred to as a combination indicator, is an asset that has any combination of features that common shares does not, such as those of an equity and a promissory note.

<h3>How do preferred stocks work?</h3>

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I understand that the question you are looking for is:

Lindsey Holt owns stock in the Galloway Gems Company. She knows in advance that the dividend on this stock is a $1.50 per share and that it is a promised or contractual and constant dividend . Given this, you know for sure that she purchased which type of stock?

A. Green chip

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Explanation:

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Substitutes imply a good can be used in place of another. If the price of a substitute increases, it demands decreases. The demand for the substitute good will go up. An increase in the price of peaches will increase the demand for apples. As a result, the demand curve will shift outwards. In other words, shift to the right.

C. People's incomes rise (and apples are a normal good).

Demand for normal goods increase as the people's income rises. More people will afford to buy apples. If people are now earning more, the demand for apples will go up. The demand curve will shift to the right to indicate a surge in demand.

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