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
FinnZ [79.3K]
3 years ago
7

Suppose Microsoft stock will provide either a return of 10 or 20 percent over the next year and that the probability of the form

er outcome is 0.25 while the probability of the latter is 0.75. If the utility an investor derives from a 10 percent return on Microsoft stock is 200 and the utility the investor derives from a 20 percent return is 400, the investor's expected utility from holding Microsoft stock is _____.
Business
1 answer:
nignag [31]3 years ago
5 0

Answer:

The correct answer is b. 350.

Explanation:

To calculate the expected profit, we use the data from the statement:

10% Yield = 25% Probability

20% Yield = 75% Probability

Profit 10% = 200 * 25%

Profit 20% = 400 * 75%

TOTAL 30% = 50 + 300 = 350

What was done was multiply the percentages of profit vs. the expected return for each group of actions. The sum of both is the total expected by investors as Microsoft profits.

You might be interested in
On January 1, 2020, Martinez Company makes the two following acquisitions. 1. Purchases land having a fair value of $330,000 by
vova2212 [387]

Answer:

Explanation:

a)

Date Account Titles and Explanation Debit Credit

January 1, 2020 Land $360,000.00

Discount on notes payable $246,621.00

Notes payable $ 606,621.00

(To record purchase of land by issuing note payable)

PV of $606,621 discounted at 11% =606,621/(1.11)^5 = $ 360,000

2.

Computation of the discount on notes payable:

Maturity value $560,000

Present value of $560,000 due in 8 years at 11% = $560,000 * 0.43393 = $ 243,000

Present value of $39,200 payable annually for 8 years at 11% annually—$39,200 * 5.14612 = $ 201,728

Present value of the note = $ 243,000 + $ 201,728 = $ 444,728

Discount = $ 560,000 - $ 444,728 = $ 115,272

Date Account Titles and Explanation Debit Credit

January 1, 2020 Equipment $444,728.00

Discount on notes payable $115,272.00

Notes payable $ 560,000.00

(To record purchase of equipment by issuing note payable)

b)

1.

Date Account Titles and Explanation Debit Credit

December 31, 2020 Interest expense ($ 360,000*11%) $39,600

Discount on notes payable $39,600

(To record the interest expense recorded and discount amortized)

2.

Date Account Titles and Explanation Debit Credit

December 31, 2020 Interest expense ($444,728 * 11%) $48,920

Discount on notes payable $9,720

Interest Payable ( $ 560,000 * 7%) $39,200

(To record the interest expense recorded)

7 0
3 years ago
True or False: The parts of the cells called, cellular respiration, glucose and oxygen combine to make carbon dioxide and water
Cloud [144]

Answer:

Ture

Explanation:

3 0
2 years ago
Read 2 more answers
has a monthly target operating income of $ 15 comma 000. Variable expenses are 70​% of​ sales, and monthly fixed expenses are $
seraphim [82]

Answer:

Margin of safety=55.6%

Explanation:

The formula for the operating income is as folows;

operating income=Sales revenue-total cost

where;

operating income=$ 15,000

Sales revenue=S

total cost=variable cost+fixed cost

variable cost=70% of S=(70/100)×S=0.7 S

fixed cost=$12,000

replacing;

15,000=S-(0.7 S+12,000)

15,000+12,000=0.3 S

27,000=0.3 S

S=27,000/0.3

S=Answer:

Explanation:

The formula for the operating income is as follows;

operating income=Sales revenue-total cost

where;

operating income=$ 15,000

Sales revenue=S

total cost=variable cost+fixed cost

variable cost=70% of S=(70/100)×S=0.7 S

fixed cost=$12,000

replacing;

15,000=S-(0.7 S+12,000)

15,000+12,000=0.3 S

27,000=0.3 S

S=27,000/0.3

S=$90,000

Current sales=$90,000

The formula for margin of safety is as follows;

Margin of safety=(Current sales level-break even point sales level)/current sales levels

At break even,

Operating income=0

0=S-(0.7 S+12,000)

0=S-0.7 S-12,000

0.3 S=12,000

S=12,000/0.3

S=40,000

Break even sales=$40,000

replacing;

Margin of safety=((90,000-40,000)/90,000}×100

Margin of safety=55.6%

7 0
3 years ago
Entries for Bank Reconciliation The following data were accumulated for use in reconciling the bank account of Mathers Co. for J
mario62 [17]

Explanation:

The journal entries are as follows

a. Cash $540

         To Account payable $540

(Being the error is recorded)

It is computed below:

= Corrected amount - incorrect amount

= $710 - $170

= $540

b. Bank service charges $20

          To Cash $20

(Being the bank services charges are paid in cash is recorded)

All other information is ignored

5 0
2 years ago
Shelton inc. has sales of $23.8 million; total equity of $31.3 million; and total debt of $16.7 million. if shelton's profit mar
tiny-mole [99]

Sales = $23.8 million

Total equity = $31.3 million

Total debt = $16.7 million

Profit margin = 8% = 0.08

Return of assets = ?

First we calculate the total assets:

Total assets = Total debt + Total equity

= $16.7 million + $31.3 million = $48 million

Now find net income by using this formula:

Profit margin = Net income / Sales

<span> Net income = Profit Margin × Sales  = 0.08 x 23,800,000 = $1,904,000 Now calculate Return of assets: Return on assets = Net income / Total assets  =$1,904,000 / 48,000,000 </span>

Return on assets = 3.967%

6 0
3 years ago
Other questions:
  • Hunters should teach others, work with landowners, and cooperate with game wardens. these efforts are part of what makes a hunte
    11·1 answer
  • f the interest rate is 7.8% per year, approximately how long will it take for your money to quadruple in value? (Use the Rule of
    9·1 answer
  • Which of the following statements is true of entrepreneurs?
    8·2 answers
  • Unlimited marital deduction applies when there is an outright bequest of stock
    11·1 answer
  • A basic finding of labor economics is that workers who have more experience in the labor force are paid more than workers who ha
    15·1 answer
  • in a 351$ transfer grebe corporation receives property in exchange for stock. Will grebes holding period for the porperty be the
    8·1 answer
  • Shane, a sales manager, remarked that typically, her employees sincerely and positively overstate their job performance and abil
    14·1 answer
  • Beyond Space Aeronautics is developing a profit-sharing plan. Ben, the human resource manager, assumes the employees are excited
    12·1 answer
  • Prepare journal entries to record the following transactions for the village of Radnor. Classify the expenditures as Parks suppl
    9·1 answer
  • The trial balance prepared after all closing entries have been journalized and posted is called the?
    14·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!