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
Darya [45]
3 years ago
9

The stock of ABC Corporation has a beta of 1.8 ABC Corporation earned an annual return of 14 percent during a period when the re

turn on the market portfolio was 12.5 percent. If the risk-free rate was 6 percent, did ABC Corporation outperform the market on a risk-adjusted basis?

Business
1 answer:
eimsori [14]3 years ago
5 0

Answer:

See explanations for step by step aoproach to answer and see attachment for graph

Explanation:

Plot E(R) = Rf + Beta*(Rm-Rf) as function of beta.

at 1.4

E(R) = 5% + 1.4*(12-5) = 14.8%

E(R) = WfRf + Wa*E(Ra)

= 0.4*5% + 0.6*14.8%

= 10.88%

3. Since, the beta of risk free asset is zero

Bp = wf*Bf + wa*Ba

0.6 = 1.4*wa

wa = 42.8%

wf = 57.2%

d. 14% = 5% + B*(12%-5%)

B = 9/7 = 1.28

e. 2 = wfBf + waBa

wa = 2/1.4

= 142%

It means the portfolio is created by leveraging. Take 42% of value on risk free rate as loan and invest in risky asset.

You might be interested in
Your investment has a 20% chance of earning a 30% rate of return, a 50% chance of earning a 10% rate of return, and a 30% chance
ANTONII [103]

Answer:

a: 12.8%

Explanation:

Standard Deviation would be calculated with the probability approach since there is probability given in the question.

  • Formula of Standard Deviation and the solution is given in the pictures below.
  • Although ERR the required part to calculate Standard Deviation is calculated in the text.

Calculating ERR:

ERR= Sum of Probabilities × Rate of returns.

In our question = ERR= 0.2 × 30% + 0.5 × 10% + 0.3 × (-6%) = 0.128 = 12.8%

Thus, by putting all the values in the formula you will get the answer 12.8%.

4 0
3 years ago
Unearned revenues are generally: Multiple Choice Revenues that have been earned and received in cash. Increases to common stock.
Leto [7]

Answer:

i dont get it, is there a question?

Explanation:

6 0
3 years ago
The four types of entrepreneur described by Arthur Cole were the Innovator, the Organization Builder, the Over-Optimistic Promot
slavikrds [6]
The calculating investor
5 0
3 years ago
Read 2 more answers
A manufacturing firm has discontinued the production of a certain unprofitable product line. Considerable excess production capa
harina [27]

Answer:

Please kindly check explaination for the details.

Explanation:

a.

Decision variables:

Let

X1 = no of units of product X1

X2 = no of units of product X2

X3 = no of units of product X3

Objective function is to maximize profits

Max Z = 20X1 + 6X2 + 8X3

Constraints:

8X1 + 2X2 + 3X3 <= 800

4X1 + 3X2 <= 480

2X1 + X3 <= 320

X1, X2, X3>=0

b.

please see attachment for the excel solutions.

c.

X1 = 0

X2 = 160

X3 = 160

Z = 2240

3 0
3 years ago
Unemployment insurance makes workers _____ likely to negotiate for job security when searching for a job and _____ likely to hav
vlada-n [284]

Unemployment insurance makes workers less likely to negotiate for job security when searching for a job and more likely to have a long job search.

Explanation:

Unemployment insurance is a compensation protection where people lost their jobs and follow all eligibility criteria without blame.

Unemployment insurance Workers who are self-employed and willingly fired do not have a career security policy and have to use discretionary funds to cover cases where there is no work available. State governments pay a jobless insurance

Unemployment insurance supports unemployed workers actively seeking work with cash scholarships. The Federal Unemployment Tax Act (FUTA) and state employment programs offer benefits for qualifying unemployed workers. There was a misunderstanding. Most employers pay FUTA tax on federal and state unemployment.

7 0
3 years ago
Other questions:
  • Target's liabilities exceed owners' equity.<br> a) true<br> b) false
    15·1 answer
  • Which government agency is in charge of regulating the sale of stocks and bonds? A. The Interstate Commerce Committee
    9·1 answer
  • Round Hammer is comparing two different capital structures: An all-equity plan (Plan I) and a levered plan (Plan II). Under Plan
    6·1 answer
  • A revolving credit agreement is a formal line of credit. The firm must generally pay a fee on the unused balance of the committe
    6·1 answer
  • Casio, a giant electronic products producer, synthesizes it abilities in miniaturization, microprocessor design, material scienc
    12·1 answer
  • The ______________________________ is an award competition for students attending Nuts and Bolts member schools that recognizes
    9·1 answer
  • During the current year, Rayon Corporation disposed of two different assets. On January 1, prior to their disposal, the accounts
    8·1 answer
  • 6. Which of the following has the lowest liquidity?
    13·2 answers
  • What are the benefits an organization can receive from the adoption of a risk management system?
    14·1 answer
  • suppose that you are a member of the board of governors of the federal reserve system. the economy is experiencing a sharp rise
    12·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!