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Nady [450]
3 years ago
15

A share of stock with a beta of 0.75 now sells for $50. Investors expect the stock to pay a year-end dividend of $2. The T-bill

rate is 4%, and the market risk premium is 7%. a. Suppose investors believe the stock will sell for $52 at year-end. Calculate the opportunity cost of capital. Is the stock a good or bad buy? What will investors do?
Business
1 answer:
Anna11 [10]3 years ago
7 0

Answer:

What the investors will do depends on whether the actual return will be higher, lower or the same as the required return (Opportunity cost of capital) .

The Actual return can be calculated using the Holding Period Return which is;

= (Earnings(Dividends) + (Ending Stock Price - Beginning Stock Price))/Beginning Stock Price

= (2 + (52 - 50))/50

= 4/50

= 8%

The Opportunity Cost of Capital can be calculated using CAPM.

= Risk Free Rate + beta(Market Premium)

= 4% + 0.75(7%)

= 9.25%

The Opportunity Cost of Capital is greater than the Actual Return from the stock so the stock is a bad buy.

Investors will not invest.

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A movement along the phillips curve shows that the unemployment rate and inflation rate are.
Gemiola [76]

Changing in response to the supply-side policy.

<h3>What causes a movement along the Phillips curve?</h3>
  • An increase in AD is a shift from point A to point B. Inflation rises, and the jobless rate falls when AD rises. A shift from point A to point C corresponds to a reduction in AD.
  • The Phillips curve is a diagram that illustrates the economic link between the rate of unemployment and the pace at which wages are changing in terms of money. It reflects the belief of economist A. William Phillips that wages tend to increase more quickly when unemployment is low.
  • According to the Phillips curve, unemployment and inflation are inversely related. Lower unemployment is correlated with higher inflation, and vice versa.

A movement along the phillips curve shows that the unemployment rate and inflation rate are.

Changing in response to the supply-side policy.

To learn more about the Phillips curve, refer to:

brainly.com/question/14058703

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3 0
1 year ago
Identify the type of process in business that includes purchasing materials and supplies used in manufacturing, managing invento
Sergio [31]

Answer: (D) Support process

Explanation:

 The support process is one of the type of primary process that helps in determining the main core functions and also the operations such as communication, accounting, managing and maintenance of an organization.

The main purpose of the support process is to manage the development and the configuration management in an organization.

According to the given question, the support process is refers to the business process which include the purchasing the various types of materials that is used in the manufacturing purpose such as installations and also managing the inventory system.  

 Therefore, Option (D) is correct answer.

4 0
3 years ago
Mrs. Torres goes out of town on a business trip. She spends 3 nights in a hotel at a charge of $80 per night. She pays 9% tax on
Bumek [7]
We are given the different rates and charges and is asked in the problem the unknown tax rate she pays on meals if the total cost of the trip is equal ot $420.04. In this case, the equation goes: 
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6 0
3 years ago
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PtichkaEL [24]

Answer: 14.9%

Explanation:

18300/12770x100%

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Steven wants to become a member of the labor union. Which law giver him the right to do so?
ziro4ka [17]

Answer:

D. Wanger Act

Explanation:

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