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amid [387]
3 years ago
7

In addition to​ risk-free securities, you are currently invested in the Tanglewood​ Fund, a​ broad-based fund of stocks and othe

r securities with an expected return of and a volatility of . ​Currently, the​ risk-free rate of interest is . Your broker suggests that you add a venture capital fund to your current portfolio. The venture capital fund has an expected return of ​, a volatility of ​, and a correlation of with the Tanglewood Fund. Calculate the required return and use it to decide whether you should add the venture capital fund to your portfolio. The required return is nothing​%. ​ (Round to two decimal​ places.) Use the result of the above calculation to determine whether you should add the venture capital fund to your portfolio. Should you add the venture fund to your​ portfolio?
Business
1 answer:
Murrr4er [49]3 years ago
7 0

Answer:  6.29%

Explanation:

Required return = Risk free rate + beta ( expected return - risk free rate)

Beta.

= Correlation * \frac{Volatility of venture}{Volatility of fund} \\\\= 0.16 * \frac{0.8117}{0.2636} \\\\= 0.493

Required return = 3.63% + 0.493(9.03% - 3.63%)

= 6.29%

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Whenever there is maximization of total surplus that is been received by those that are part of society by market allocation of resources then there is market Efficiency.

  • Economic efficiency can be regarded as economic state whereby there is allocation of resource to serve each individual or entity in way that everyone is satisfied while minimizing waste and inefficiency.

Therefore, When there is  an economy efficiency,  there would be maximization of total surplus.

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8 0
3 years ago
The simple rate of return focuses on accounting net operating income rather than on cash flows. Group starts
jeka94

Simple returns focus on accounting for net operating income, not cash flow. The simple method of revenue focuses on cash flow rather than accounting for net operating income.

A simple rate of return is calculated by subtracting the initial value of the investment from the current value and dividing it by the initial value. To output as%, multiply the result by 100.

Under the simple rate of return method, a dollar you receive 10 years later is considered to be worth the $ 1 you receive today. Therefore, the simple yield method can be misleading if the alternative cash flow patterns under consideration are different.

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<em>Your question is incomplete. please read below to find the full content.</em>

The Simple Rate Of Return Focuses On Accounting Net Operating Income Rather Than On Cash Flows.

A) TRUE

B) FALSE

3 0
2 years ago
Each unit requires 0.25 direct labor-hours and direct laborers are paid $14.00 per hour. In addition, the variable manufacturing
pshichka [43]

Answer:

Instructions are listed below.

Explanation:

Giving the following information:

Each unit requires 0.25 direct labor-hours and direct laborers are paid $14.00 per hour. In addition, the variable manufacturing overhead rate is $1.60 per direct labor-hour. The fixed manufacturing overhead is $95,000 per quarter.

Direct labor per unit= 0.25*14= $3.5

Direct labor equation= 3.5*x

x= units produced

For example:

100 units

Direct labor= 3.5*100= $350

7 0
3 years ago
American Paper Company has a beta of 1.2. The risk-free rate is 6 percent and the required return on the market is 14 percent. T
Lynna [10]

American Paper Company has a beta of 1.2. The risk-free rate is 6 percent and the required return on the market is 14 percent. The required rate of return on the security is:

  • -15.6%
  • -13.2%
  • -22.0%
  • -22.8%

<h3>What Is the Security Market Line?</h3>

The security market line (SML) is a line drawn on a chart that serves as a graphical representation of the capital asset pricing model (CAPM)—which shows different levels of systematic, or market risk, of various marketable securities, plotted against the expected return of the entire market at any given time.

Its Also known as the "characteristic line," the SML is a visualization of the CAPM, where the x-axis of the chart represents risk (in terms of beta), and the y-axis of the chart represents expected return. The market risk premium of a given security is determined by where it is plotted on the chart relative to the SML

The formula for plotting the SML is:

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3 0
2 years ago
An investor places $5,000 in an account. The stated annual interest rate is 6% compounded monthly. The value of the account at t
Nostrana [21]

Answer:

$5,983.40

Explanation:

Data provided in the question:

Principle amount = $5,000

Interest rate, r = 6% = 0.06

Time, t = 3 years

Compounded monthly i.e number of periods n = 12

Now,

Final amount = Principle × \left( 1 + \frac{r}{n} \right)^{\Large{n\times t}}

or

Final amount = $5,000 × \left( 1 + \frac{0.06}{12} \right)^{\Large{12\times3}}

or

Final amount = $5,000 × 1.005³⁶

or

Final amount = $5,000 × 1.196

or

Final amount = $5,983.40

7 0
3 years ago
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