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
bezimeni [28]
3 years ago
6

The risk-free rate is 7% and the expected rate of return on the market portfolio is 11%. a. Calculate the required rate of retur

n on a security with a beta of 1.92. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) b. If the security is expected to return 15%, is it overpriced or underpriced?
Business
1 answer:
____ [38]3 years ago
3 0

Answer:

Required rate of return= 14.8

If the security is expected to return 15%, it is underpriced.

Explanation:

The required rate of return on the security can be calculated using the CAPM formula which states that

Required rate of return =rf + B(rm  - rf)

where rf= risk free rate

          B= beta of the security

          rm = return on the market

Required rate of return = 0.07 + 1.92(0.11-0.07) = 14.68%

If the security is expected to return 15%, it is underpriced, and is a good investment. Discounting the expected cash-flows from the security at this higher expected return of 15% is going to yield a lower price compared to what the investor is prepared to pay given his required rate of return of 14.68%.

You might be interested in
Spin Cycle Architecture uses three activity pools to apply overhead to its projects. Each activity has a cost driver used to all
hammer [34]

Answer:

a. predetermined overhead rate for each activity

initial concept formation  = $3,310 per Project Change

design  = $3 per Square feet

construction oversight  = $1,130 per Month

b. Classification

unit-level activities :

design

batch level activities :

initial concept formation

Product level activities :

design<em> </em>

Facility level activities :

initial concept formation

construction oversight

Explanation:

This question requires application of Activity Based Costing (ABC) method of allocating overheads.

For each overhead a rate is determined as follows :

<em>initial concept formation </em>

Predetermined overhead rate = Overhead Cost / Number of Project Changes

                                                  = $52,960/ 16

                                                  = $3,310 per Project Change

<em>design </em>

Predetermined overhead rate = Overhead Cost / Square feet

                                                  = $420,000/ 140,000

                                                  = $3 per Square feet

<em>construction oversight </em>

Predetermined overhead rate = Overhead Cost / Number of Months

                                                  = $118,650/ 105

                                                  = $1,130 per Month

<em>Classification</em>

The way the activity is to be absorbed in costing determine its classification

5 0
2 years ago
Is it possible for a country with a regressive tax system to have a tax-spending system that transfers resources from the rich t
lara31 [8.8K]

Answer:A

Explanation:

A regressive tax is a tax impose in such a manner that the tax rate decreases as the amount subject to taxation increases.

5 0
3 years ago
What’s a commercial bank most likely going to do with your money when you deposit it?
sasho [114]

Answer:

keep it in-store and safe until you take some out and if it's there for a while ( like after a year or 2) they could take out a dollar each week or 5 dollars a month for the space you're taking up

8 0
3 years ago
The degree to which complete information is available best describes:
Delvig [45]
<span>Price transparency. This best describes the amount of truth or transparency about something. Complete information doesn't necessary represent somebody's understanding of something, but rather describes if all parts of said information were present to seen, heard, felt..etc.</span>
7 0
3 years ago
Marginal revenue for a monopolist is computed asa.average revenue times quantity divided by price.b.total revenue divided by qua
aksik [14]

Statement that explains Marginal revenue and it can be computed for a monopolist is C:sold.c.change in total revenue per one unit increase in quantity sold.

  • Marginal revenue  can be regarded as central concept in microeconomics which focus on additional total revenue that us been gotten by increasing product sales by 1 unit.

  • In monopolist,it can be computed by change in total revenue with respect to a unit increase that is been sold.

Therefore, option C is correct.

Learn more

brainly.com/question/25404320?referrer=searchResults

7 0
2 years ago
Other questions:
  • 2 things
    10·1 answer
  • The constraint at Rauchwerger Corporation is time on a particular machine. The company makes three products that use this machin
    15·1 answer
  • The asset's book value is $70,000 on July 1, Year 3. On that date, management determines that the asset's salvage value should b
    12·1 answer
  • The following costs and inventory data were taken from the accounts of Simon Company for 2010:
    6·1 answer
  • Which type of science is economics?
    5·2 answers
  • Education and Training !<br> Can anybody help me on this? I don’t understand ☹️...
    8·1 answer
  • The projected benefit obligation was $460 million at the beginning of the year. Service cost for the year was $25 million. At th
    12·1 answer
  • Answer the question on the assumption that the legal reserve ratio is 20 percent. Suppose that the Fed sells $500 of government
    13·1 answer
  • Firms that specialize in helping companies raise capital by selling securities to the public are called _________.
    5·1 answer
  • Four P’s of business
    10·2 answers
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!