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valina [46]
3 years ago
12

Suppose you observe the following situation: Security Beta Expected Return A 1.16 .1137 B .92 .0984 Assume these securities are

correctly priced. Based on the CAPM, what is the return on the market
Business
1 answer:
lyudmila [28]3 years ago
3 0

Answer: 10.35%

Explanation:

The Capital Asset Pricing Model is used to calculate the expected return of a security with the expression

Expected return = Risk free rate + Beta ( Market return - risk free rate)

( Market return - risk free rate) is also known as the market premium and can be calculated by;

= \frac{Expected return on A - Expected return on B}{Beta for A - Beta for B}

= \frac{0.1137 - 0.0934}{1.16 - 0.92}

= 0.0153/0.24

= 6.375%

= 6.38%

Expected return A = Risk free rate + Beta A ( Market return - risk free rate)

0.1137 = Risk free rate + 1.16 (6.38%)

Risk free rate = 0.1137 - 1.16(6.38%)

Risk free rate = 3.97%

Market Expected return = Market Risk Premium + risk free rate

= 6.38% + 3.97%

= 10.35%

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A. 160

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2 years ago
During the current month, the Acme company had receivables of $16,590. It also had outgoing expenditures of $12,730. The company
andreyandreev [35.5K]

Answer:

$3,849.87

Explanation:

The change in balance is the net of the receipts and the payments.

The receipts include the receivables and the interest paid by the bank while the payments include the outgoing expenditure and bank charge.

Balance change

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6 0
3 years ago
A company has a cost of debt (before tax) of 5.5% and a cost of equity of 12.8%. In addition, the company has a target capital s
alexira [117]

Answer:

10.12%

Explanation:

Wacc = (D / V)rd (1 - t) + (E / V) re

(D/V) = 0.3

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T = tax rate = 30%

(E / V) = 0.7

Re = marginal cost of equity = 12.8%

= (0.3 x 5.5% × 0.7) + (0.7 x 12.8%) = 1.155% + 8.96% = 10.12%

I hope my answer helps you

4 0
3 years ago
Which of the following is not part of the role of a forester? a. develop sustainable practices b. prevent removal of timber c. d
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"b" is not part of the role of a forester.

Explanation:

8 0
3 years ago
Read 2 more answers
Gabriel put $6000 in a 2-year CD paying 4% interest, compounded monthly. After 2 years, he withdrew all his money. What was the
NeTakaya
First, we calculate for the effective annual interest given the interest in the scenario. 
                          ieff = (1 + i/m)^m - 1
Substituting the values,
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The effective interest is equal to 4.07%. 

The future amount after 2 years,
                         F = ($6000) x (1.0407)^2 = $6498.86
5 0
3 years ago
Read 2 more answers
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