Company A has a beta of 0.90, while Company B's beta is 1.20. The required return on the stock market is 11.00%, and the risk-fr
ee rate is 4.5%. What is the difference between A's and B's required rates of return? (Hint: First find the market risk premium, then find the required returns on the stocks.)
The difference between A's and B's required rate of return is 1.95% with B's required rate of return being 1.95% higher than A's.
Explanation:
The required rate of return is the minimum return that investors require to invest in a stock. Using CAPM, we can calculate the required rate of return on a stock using the following formula,
r = rRF + Beta of Stock * (rM - rRF)
Where,
rRF is the risk free rate
rM is the expected return on market
For company A, r = 0.045 + 0.9 * (0.11 - 0.045) = 0.1035 or 10.35%
For company B, r = 0.123 or 12.30%
The difference between A's and B's required rate of return is,
Difference = 12.30% - 10.35% = 1.95% with B's required rate of return being 1.95% higher than A's.
the stock price <u>has decreased in the same proportion as the dividend. </u>
Explanation:
Since we are told that the dividend yield remained the same, and the dividend decreased by 2.03%, we know that the price of the stock decreased by 2.03%.
During a sequential product development, each department works to complete its stage before the process continues to the next department.
A team-based new product development approach is used to develop products faster and to be able to sell them faster. This approach does not require that each department finishes its stage before passing to the next one. Instead, several departments work together simultaneously.
The correct answer is "Executive office of the president"
Explanation:
The Executive Office of the President of the United States (EOP) is a gathering of agencies belonging to the executive branch of the government of the United States of America. The principal function is to support the president works.
The Office of Management and Budget and the Council of Economic Advisers are part of the EOP.
