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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%.

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In 2019, Muhammad purchased a new computer for $16,000. The computer is used 100% for business. Muhammad did not make a $179 ele
Len [333]

Answer: His cost deduction would be $3,200

Explanation:

Without the mid-quarter convention Muhammad’s 2019 MACRS deduction would be $3,200 ($16,000 x .20). The mid-quarter convention slows down the taxpayers available cost recovery deduction.

8 0
3 years ago
How many days will it take for $1500 to earn $16 interest if it is deposited in a bank paying simple interest at the rate of 4%/
JulsSmile [24]

Answer:

97 days

Explanation:

In simple interest method, the interest is calculated by the following formula

I= P x R x T

I= interest

P = principal amount

R =interest rate

T= Time

In this case

I=$16

P=$1500$

R= 4% or 0.04%

T= time

$16= $1500 x 0.04 x Time

$16 =60 x Time

Time = 16/60

time = 0.2666 year.

time in days =  0.26666 x 365 days

=97.333 days

=97 days

8 0
2 years ago
The risks created by rapid changes in it have not affected which concepts of internal control?
Goryan [66]

Internal control objectives remain essentially the same although technology, risks, and control methods change. Thus, many concepts of control (management's responsibility, the role of the control environment, reasonable assurance, monitoring, and cost-benefit analysis) are relevant regardless of IT changes.

<h3>What is technology?</h3>
  • The use of skills, methods, and processes utilized in industrial production and scientific study combined with collected knowledge to create technology.
  • All equipment and electronic devices operate using technology, whether or not the user is fully aware of how they work for the organization's goals.
  • Systems make up the technologies used in modern life.
<h3>Why is technology so important in today's world?</h3>
  • Information sharing, meal preparation, clothing cleaning, and transportation are all things we do with the help of technology.
  • However, even commonplace technologies like door locks, floor tiles, and furniture are things we now take for granted and that we consider to be less spectacular than 3D printing or self-driving automobiles.

Learn more about technology here:

brainly.com/question/9171028

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5 0
1 year ago
You sold ten put contracts on Cross Town Bank stock at an option price per share of $0.85. The options have an exercise price of
Gnoma [55]

Answer:

-$4,150

Explanation:

Calculation to determine your net profit or loss on this investment

Using this formula

Net profit/Loss=(Option price per share-Exercise price+Stock price)×100×10

Let plug in the formula

Net loss = ($0.85 - $39 + $34) × 100 × 10

Net loss =-$4.15×100×19

Net loss = -$4,150

Therefore your net loss on this investment is -$4,150

8 0
2 years ago
Which of the following is an arbitrage opportunity?
FromTheMoon [43]

Answer:

D. The bank offers you a loan at 4% interest and a savings account that pays 5% interest.

Explanation:

<em>Arbitration</em> is a <em>financial strategy</em> that consists of the price difference between different markets on the same financial asset to obtain an economic benefit, usually without risk.

To perform arbitration, complementary operations (buy and sell) are carried out at the same time and wait for prices to adjust. The arbitration takes advantage of this divergence and obtains a risk-free gain. In other words, the arbitrajista is positioned short (sells) in the market with higher price and long (purchase) in the market with lower price. The benefit would come from the difference between the two markets.

7 0
3 years ago
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