Answer:
r or expected rate of return = 0.1077 or 10.77%
Explanation:
Using the CAPM, we can calculate the required/expected rate of return on a stock. This is the minimum return required by the investors to invest in a stock based on its systematic risk, the market's risk premium and the risk free rate.
The formula for required rate of return under CAPM is,
r = rRF + Beta * rpM
Where,
- rRF is the risk free rate
- rpM is the market risk premium
r = 0.051 + 0.9 * 0.063
r or expected rate of return = 0.1077 or 10.77%
Answer: Decrease government revenue and decrease deadweight loss from the tax.
Explanation:
Decrease gov rev and decrease deadweight loss from the tax.
At AB, the government revenue will be:
= Quantity × Tax rate
= 1 × 5
= 5
The deadweight loss will be:
Deadweight Loss= 0.5 × Change in quantity × Change in Price
= 0.5 × (9-4) × (2-1)
= 0.5 × 5 × 1
= 2.5
At CD,
the government revenue will be:
= 1.5 × 2.5
= 3.75
The deadweight loss will be:
= 0.5 × (7.5-5) × (2-1.5)
= 0.5 × 2.5 × 0.5
= 0.625
Based on the calculation above, both the government revenue and the deadweight loss decreases.
Answer:
Elastic- D
Explanation:
When the demand of a product is said to be elastic, it means the price and other factors have a large effect on the quantity purchased by consumers. An increase in price will produce an effect where the quantity purchased decreases.
Elastic demand as opposed to inelastic demand indicates that the consumers can do without that product and can afford to do comparisons before shopping as there is no desperation for the product.
Answer:
The correct answers that fills the gap are: an increase; an increase.
Explanation:
Real GDP is based on one-year prices and allows a comparison of the production of a given country in different periods of time, by isolating changes in prices, perfectly reflecting net purchasing power, regardless of changes in Prices over time.
Answer:
A.P(0)=$48.89
B.P(1)=$51.56
C.P(0)=$49.35
Explanation:
A. Calculation for what price would you be willing to pay for a share of Acap stock today if you planned to hold the stock for two year
Using this formula
P(0)=Dividend per share/Percentage of Equity cost of capital +(Dividend next year+Stock price)/Percentage of Equity cost of capital
Let plug in the formula
P(0) = 2.88/ 1.103 + (3.01+ 53.87) / 1.103^2=
P(0)=2.611+56.88/1.216609
P(0)=59.491/1.216609
P(0)=$48.89
b. Calculation for what price would you expect to be able to sell a share of Acap stock in one year
Using this formula
P(1)=(Dividend next year + Stock price)/Percentage of Equity cost of capital
Let plug in the formula
P(1) = (3.01 + 53.87) / 1.103 = $50.00
P(1)=56.88/1.103
P(1)=$51.56
c.Calculation for what price would you be willing to pay for a share of Acap stock today if you planned to hold the stock for one year
Using this formula
P(0)=(Dividend per share + P(1)/Percentage of Equity cost of capital
Let plug in the formula
P(0) = (2.88 + 51.56) / 1.103
P(0)=54.44/1.103
P(0)=$49.35
Therefore compare to the answer in (a)
if you planned to hold the stock for two year you will have $48.89 and if you planned to hold the stock for one year you will have $49.35.
