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2 years ago

Suppose you observe the following situation:

Business

1 answer:

Finger [1]2 years ago

3 0

Answer:

a. The expected return on the market is 10.89%

b. The risk-free rate is 1.52%

Explanation:

In order to calcuate the expected return on the market and the he risk-free rate we would have to use the following formulas:

Expected return=risk-free rate +Beta*(market rate- risk-free rate )

13.23=Rf+1.25*(Rm-Rf)

13.23=1.25Rm-0.25Rf

Rm=(13.23+0.25Rf)/1.25

To calculate the risk free rate, we use the following:

9.67=Rf+0.87*(Rm-Rf)

9.67=0.13Rf+0.87Rm

9.67=0.13Rf+0.87*(13.23+0.25Rf)/1.25

9.67=0.13Rf+9.20808+0.174Rf

Rf=(9.67-9.20808)/(0.13+0.174)

=1.52%(Approx)=risk free rate

Rm=(13.23+0.25Rf)/1.25

=10.89%(Approx)=market rate

You might be interested in

Which of the following statements best describes the Sherman Act?A. The Sherman Act established the United States Securities and

aleksandr82 [10.1K]

Answer:

B. The Sherman Act allows the US government to regulate activities that restrain competition and trade

Explanation:

The Sherman Antitrust Act of 1890 was first legislation enacted by US congress. It was brought into force to regulate competition and trade among enterprises. This act prohibits agreement in restraint of trade or interference of power in trade like price fixing, bid rigging, etc.

The Sherman Act did not work for long as it restrict the business merger and people are confused about knowing the motive of the act as it is not designed properly.

8 0

2 years ago

You are considering investing $1,000 in a T-bill that pays 0.05 and a risky portfolio, P, constructed with 2 risky securities, X

Leokris [45]

Answer:

% in T bills = 18.92%, % in P = 81.08%

Explanation:

Portfolio return = Weighted average return

Return of portfolio P = 0.14*0.6 + 0.10*0.4

Return of portfolio P = 0.124

Let % money in T bills be x

0.11 = 0.05*x + 0.124*(1-x)

0.11 = 0.05x + 0.124 - 0.124x

0.014 = 0.074x

x = 18.92%

Hence, % in T bills = 18.92%, % in P = 81.08%

3 0

2 years ago

Southwest Pediatrics has the following balances on December 31, 2021, before any adjustment: Accounts Receivable = $121,000; All

kogti [31]

Answer:

Bad debt expense $ 26,300

Allowance for Uncollectible Accounts $ 26,300

Explanation:

Initial Balance

Accounts Receivable $ 121,000

Allowance for Uncollectible Accounts $ 2,100 - Debit

Bad Debts Expense = 20% / Accounts Receivable $ 24,200

Adjusting Entry

Bad debt expense $ 26,300

Allowance for Uncollectible Accounts $ 26,300

Final Balance

Accounts Receivable $ 121,000

Allowance for Uncollectible Accounts $ 24,200 - Credit

Accounts Uncollectible are those credit that the company give and there are not chances of been collected.

When the customers buy products on credits but then the company can't collect the debt, then it's necessary to write off the unpaid bill as uncollectible

One way it's to write-off directly the bad debts at the moment decided that the credit are uncollectible, the total amount it's reported as bad debt expenses which affect negativly the income statement and the accounts receivable are reduce in the same amount, less assets.

The other way it's to determine a percentage of total amount of accounts receivables as uncollectible, exist many ways to analize the accounts receivable and figure the value of uncollectible.

When the company have the percentage of uncollectible accounts the journal entry required is Bad Expenses (debit) with Allowance for Uncollectible Accounts (credit)

At the moment of the write-off as the expenses were before recognized we only use the Allowance for Uncollectible Accounts (Debit) with Accounts Receivable (Credit), with this we are recognizing the uncollectible credit of the company.

6 0

3 years ago

Today, you sold 540 shares of stock and realized a total return of 6.3 percent. You purchased the shares one year ago at a price

GuDViN [60]

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 = $[\frac{540X-12,843}{12,960} ]$

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%

3 0

3 years ago

Bell Inc. took a physical inventory at the end of the year and determined that $830,000 of goods were on hand. In addition, Bell

Otrada [13]

Answer:

Bell inc should report $980,000 as the total amount of inventory at the end of the year.

Explanation:

Given information -

Inventory that were on hands - $830,000

Inventory that was in transit - $60,000

Inventory that was out on consignment - $90,000

Here for taking out the total inventory all of the given above items would be added .

Inventory that was in transit would be added because these f.o.b. goods would be considered transferred from seller to buyer as soon as they are shipped, so it doesn't matter if they're received two days after the inventory count , they will be added.

Goods which are sent on consignment would also be added because goods would remain in the name of consignor ( Bell inc ) until they're sold by consignee ( an agent who has been hired by Bell inc to sell its goods )

Inventory at end of year - $830,000 + $60,000 + $90,000

= $980,000

6 0

3 years ago