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3 years ago

True or False:

Business

1 answer:

rusak2 [61]3 years ago

4 0

Answer:

Check the explanation

Explanation:

Efficient market theory states that the security price reflects all the available information of the market. It means there is no reason to believe that prices are incorrect.

Thus, the given statement is false.

The past data is not useful for decision making. Information of past trends may not help the investor to earn abnormal returns.

The statement is consistent with weak form efficiency as current price reflects the past price movements.

Thus, the statement belongs to weak form efficiency.

The stock price will increase and settle at a new equilibrium level.

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1. Suppose the amount of premium leather decreases from 180 to 150 a. Does the shadow price change? Why or why not? b. If possib

kkurt [141]

Answer:

Explanation: A. Shadow price has not changed because Shadow price show value of a commodity without considering final cost.

B. Change in value 180 - 150/180 X 100 = 16.7

C. The optimal solution didn't change because the product price went from it highest profit 180 to it's least cost 150

5 0

3 years ago

Read 2 more answers

Consider a risky portfolio. The end-of-year cash flow derived from the portfolio will be either $150,000 or $290,000 with equal

lara [203]

Answer:

(A) The price you will be willing to pay for the portfolio is $194,690.

(B) The expected rate of return is 13%.

Explanation:

A. If you require a risk premium of 7%, how much will you be willing to pay for the portfolio?

The amount you be willing to pay for the portfolio can be calculated using the following formula:

The price you will be willing to pay for the portfolio = Expected cash flow / (1 + Required rate of return) ................... (1)

Where;

Expected cash flow = ($150,000 * 0.5) + ($290,000 * 0.5) = $220,000

Required rate of return = Risk free rate + Risk premium = 6% + 7% = 13%, or 0.13

Therefore, we have:

The price you will be willing to pay for the portfolio = $220,000 / (1 + 0.13) = $220,000 / 1.13 = $194,690

B. Suppose the portfolio can be purchased for the amount you found in (a). What will the expected rate of return on the portfolio be?

The expected rate of return (E(r)) can be calculated using the following formula:

Amount to be paid for the portfolio * [1 + E(r)] = Expected cash flow

Therefore, we have:

$194,690 * [1 + E(r)] = $220,000

$194,690 + ($194,690 * E(r)) = $220,000

$194,690 * E(r) = $220,000 - $194,690

$194,690 * E(r) = $25,310

E(r) = $25,310 / $194,690 = 0.13, or 13%

Therefore, the expected rate of return is 13%.

C. Now suppose you require a risk premium of 15%. What is the price you will be willing to pay now?

Required rate of return = Risk free rate + Risk premium = 6% + 15% = 21%, or 0.21

Using equation (1) in part A, we have:

The price you will be willing to pay for the portfolio = $220,000 / (1 + 0.21) = $220,000 / (1.21) = $181,818

6 0

2 years ago

Risk is an important concept affecting security prices and rates of return. Risk is the chance that some unfavorable event will

Ulleksa [173]

Answer:

The higher an investment’s risk, the HIGHER THE RETURNS AN INVESTOR WILL REQUIRE.

Explanation:

By saying that investors are risk averse, it means that given a similar level of returns, an investor will choose the investment with the lowest risk. That is why investors generally prefer and are willing to pay more for less risky investments, which results in lower returns (higher price ⇒ lower returns).

So high risk investments will always have a lower price than low risk investments, since the returns demanded by investors are proportional to the risk of the investment.

6 0

3 years ago

Fill in the missing amounts.

aleksandrvk [35]

Solution

Yoste Company Noone Company

Sales revenue($100,000 + $5,000) $90,000 $105,000

Sales returns and allowances ($6,000) ($5,000)

Net sales $84,000 $100,000

Cost of goods sold($100,000 - $40,000) ($58,000) ($60,000)

Gross profit($84,000 - $58,000) $26,000 $40,000

Operating expenses($40,000 - $17,000) ($14,380) ($23,000)

Net income($26,000 - $14,380) $11,620 $17,000

Net Income divide by Net Sales = Profit Margin Ratio
Gross Profit divide by Net Sales = Gross Profit Rate

Yoste Company :

Profit Margin Ratio = $11,620 divide by $84,000 = 13.83%

Gross Profit Rate = $26,000 divide by $84,000 = 30.95%

Noone Company:

Profit Margin Ratio = $17,000 divide by $100,000 = 17%

Gross Profit Rate = $40,000 divide by $100,000 = 40%

6 0

2 years ago

W. L. Gore & Associates is organized in such a way that it has no formal job titles, job descriptions, or chains of command.

Harrizon [31]

Answer:

B) a decentralized structure.

Explanation:

In a decentralized organizational structure, many decision making responsibilities are delegated from upper management to middle and lower management. Most normal day-to-day decisions are made by entry level employees and lower management. The company's organizational structure is not rigid and most decisions can be made rather quickly.

5 0

2 years ago