1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Anni [7]
3 years ago
9

The risk-free rate is 6% and the expected rate of return on the market portfolio is 13%. a. Calculate the required rate of retur

n on a security with a beta of 1.25. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) b. If the security is expected to return 16%, is it overpriced or underpriced
Business
1 answer:
svet-max [94.6K]3 years ago
5 0

Answer:

a) The required rate of return is 14.75%

b) The expected return on this stock is 16% which is more than its required rate of return 14.75%, thus it is underpriced.

Explanation:

a)

Using the SML equation, we can calculate the required rate of return (r) of a stock.

r = rFR + β * (rM - rFR)

r = 6% + 1.25 * (13% - 6%)

r = 0.1475 or 14.75%

b)

The SML shows the return that is required on a security based on the risk is carries. Using SML we calculate the required rate of return which is the percentage return that investors require a security to provide.

If the expected return is greater than the required rate of return which means that security is expected to provide more than is required then the security is underpriced.

The expected return on this stock is 16% which is more than its required rate of return 14.75%, thus it is underpriced.

You might be interested in
What is the name of the international community of network designers, operators, vendors and researchers concerned with the evol
Shalnov [3]
My apologies that no one has gotten back to you quickly enough. the team is working on answering more questions.
<span>thank you for using Brainly!</span>
5 0
3 years ago
. The organizers of a conference in the Houston Convention Center are evaluating the possibility of setting up a computer area w
Mars2501 [29]

Answer:

They would need to have at least 3 computers

Explanation:

According to the given data we have the following:

Arrival rate = 15 persons per hour

Servicing rate = 60 / 10 = 6 persons per hour with one computer

Servicing rate with x number of computers = 6x per hour

Servicing rate at 90% utilisation = 6x (0.90) = 5.40x per hour

Therefore to service 13 arrivals per hour, we will need x computers = 15/ 5.40 = 2.78

With 2 computers, the service capacity will be 12 per hour and the utilisation will be 15/12 = 125%, which exceeds the organiser’s standard of 90% utilization.

With 3 computers, the service capacity increases to 18 persons per hour. If only 13 persons arrive, the utilisation rate will be 15 / 18 = 83.33%, below the required maximum of 90% utilisation.

Therefore, the 2.78 can be rounded off to next whole number 3 computers

4 0
3 years ago
Read 2 more answers
The U.S. fiduciary monetary system: a. is one where money is not convertible to a valuable commodity such as gold. b. is the one
Minchanka [31]

The U.S. fiduciary monetary system is one where money is not convertible to a valuable commodity such as gold.

Option a

<u>Explanation: </u>

In fiduciary monetary system, the money is issued by the government and the value of the money depends uniquely on faith of the public that the currency represents command over services and goods.  The word fiducia is from Latin and it means trust or confidence.

Fiduciary money includes demand deposits of banks namely checking accounts. Fiduciary money is accepted depending on the trust its issuer commands.

The fiduciary currency is supplied in the economy by Fed. Fiduciary money can be classified into two categories namely,

  • Paper money - Includes all the banknotes  
  • Divisional currency  - Includes all the coins

8 0
3 years ago
Socioeconomic market segmentation is another name for _____ segmentation.
Advocard [28]
I think the correct answer would be demographic segmentation. It is a type of market segmentation where the consumers are classified according to race, religion, family, gender and/or income. It is a way to help an organization target specific consumers.
7 0
3 years ago
Explain whether each of the following will cause a shift of the AD curve or a movement along the AD curve. a. Firms become more
Aleks04 [339]

Answer:

a. AD curve will shift to the right

b. AD curve will shift to the left

c. Movement along the AD curve.

Explanation:

a. When firms become more optimistic and increase their spending on machineries,this brings about changes in investment and it will cause a shift to the right in the aggregate demand curve.

b. When The federal government increases taxes in an attempt to reduce a budget deficit. This will cause a change in consumption as people will have less money to spend since disposable income has been reduced, and it will cause the aggregate demand curve to shift inwards to the left.

c. A 4 percent in US inflation will bring about a change in price level and there will be a movement along the aggregate demand curve.

7 0
3 years ago
Other questions:
  • Rodeo ranch's agent slim is authorized to draw checks on rodeo ranch's account in town bank. upper range corporation is a rodeo
    13·1 answer
  • Polk Software Inc. has a quick ratio of 2.00x, $32,850 in cash, $18,250 in accounts receivable, some inventory, total current as
    12·1 answer
  • Which factor determines who a society will produce goods and services for?
    14·2 answers
  • Jessie is watching television and sees an advertisement for a computer. The ad provided detailed information about the computer
    10·1 answer
  • The economic order quantity (EOQ) deals with calculating the proper order size with respect to ____ costs and ____ costs.
    6·1 answer
  • Suppose the civilian non-institutional population equals 100,000 persons; the civilian labor force equals 75,000 persons; there
    10·1 answer
  • What are the 3 main types of information companies look for when they conduct marketing research?
    9·1 answer
  • To create a balanced budget one must make sure too
    7·1 answer
  • Dyl Pickle Inc. had credit sales of $4,000,000 last year and its days sales outstanding was DSO = 35 days. What was its average
    11·2 answers
  • he manufacturing overhead budget at Franklyn Corporation is based on budgeted direct labor-hours. The direct labor budget indica
    13·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!