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valina [46]
2 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]2 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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2 years ago
Spandocorp is a diversified firm that makes industrial, military and consumer products from spandex. spandocorp manages each of
mars1129 [50]

The answer is economic value added measure of divisional performance.

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3 years ago
You're more likely to be effective if you begin with "harder" tactics and move to "softer" tactics only if the harder tactics fa
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Answer:

False

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7 0
3 years ago
Gross billings for merchandise sold by lang company to its customers last year amounted to $11,720,000; sales returns and allowa
Alborosie

Calculation of Net sales last year for Lang Company:

It is given that Gross billings for merchandise sold by Lang Company to its customers last year amounted to $11,720,000; sales returns and allowances were $370,000, sales discounts were $175,000.

Net sales can be calculated using the following formula;

Net Sales = Sales –Sales Returns –Allowances

=  $11,720,000-$370,000-$175,000

= $11,175,000


Hence the Net sales last year for Lang Company is $11,175,000

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5 0
3 years ago
Which of the following transactions require a TREC Seller's Disclosure Notice, to be provided?
xeze [42]

Answer:

none

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6 0
3 years ago
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