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9966 [12]
3 years ago
8

Stock A has a beta of 0.8, Stock B has a beta of 1.0, and Stock C has a beta of 1.2. Portfolio P has equal amounts invested in e

ach of the three stocks. Each of the stocks has a standard deviation of 25%. The returns on the three stocks are independent of one another (i.e., the correlation coefficients all equal zero). Assume that there is an increase in the market risk premium, but the risk-free rate remains unchanged. Which of the following statements is correct? Answers: a-The required returns on all three stocks will increase by the amount of the increase in the market risk premium. b-The required return on Stock A will increase by less than the increase in the market risk premium, while the required return on Stock C will increase by more than the increase in the market risk premium. c-The required return of all stocks will remain unchanged since there was no change in their betas. d-The required return on the average stock will remain unchanged, but the returns of riskier stocks (such as Stock C) will decrease while the returns on safer stocks (such as Stock A) will increase. e-The required return on the average stock will remain unchanged, but the returns of riskier stocks (such as Stock C) will increase while the returns of safer stocks (such as Stock A) will decrease.
Business
1 answer:
Marat540 [252]3 years ago
5 0

Answer:

b-The required return on Stock A will increase by less than the increase in the market risk premium, while the required return on Stock C will increase by more than the increase in the market risk premium.

Explanation:

Beta reflects the risk associated, as the beta is low, the expected risk is also low, accordingly return expected is also keeping all things constant.

When Beta is less than 1 it means the returns will be lower than market, accordingly for Stock A the return will increase but slower than the market risk.

Whereas, the Beta is more than 1 of Stock B and accordingly the risk is more but return will grow even faster as the risk volatility is high than the market risk.

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Answer:

1. Justin’s employer was downsizing and offered employees an amount equal to one year’s salary if the employee would voluntarily retire.

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2. Trina contracted a disease and was unable to work for six months. Because of her dire circumstances, her employer paid her one-half of her regular salary while she was away from work.

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3. Coral Corporation collected $1,000,000 on a key person life insurance policy when its chief executive died. The corporation had paid the premiums on the policy of $77,000, which were not deductible by the corporation.

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8 0
3 years ago
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Ghella [55]

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Demand-supply is an economic version of price determination in a market. It postulates that preserving all else identical, in an aggressive market, the unit price for a specific appropriate, or other traded item which includes hard work or liquid financial property, will range till it settles at a point in which the quantity demanded (at the modern price) will same the quantity supplied (on the modern-day price), ensuing in an economic equilibrium for rate and quantity transacted.

Equilibrium is a scenario wherein economic forces consisting of delivery and demand are balanced and in the absence of outside impacts the values of economic variables will no longer alternate.

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7 0
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Elanso [62]

Explanation:

A cost-of-living index is a theoretical price index that measures relative cost of living over time or regions. It is an index that measures differences in the price of goods and services, and allows for substitutions with other items as prices vary.

7 0
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At the beginning of the period, there were 500 units in process that were 60% complete as to conversion costs and 100% complete
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