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Llana [10]
3 years ago
11

Themarketpriceofasecurityis$50.Itsexpectedrateofreturnis14%.Therisk-freerateis6%, and the market risk premium is 8.5%. What will

be the market price of the security if its correla- tion coefficient with the market portfolio doubles (and all other variables remain unchanged)? Assume that the stock is expected to pay a constant dividend in perpetuity.
Business
1 answer:
mezya [45]3 years ago
5 0

Answer:

$31.82

Explanation:

market price $50

expected rate of return /Re) = 14%

Div = $50 x 14% = $7

risk free rate (Rf) = 6%

market premium (Rm - Rf) = 8.5%

beta = ?

14% = 6% + (beta x 8.5%)

beta x 8.5% = 14% - 6% = 8%

beta = 8% / 8.5 = 0.941

if beta doubles to 1.882, then Re will be:

Re = 6% + (1.882 x 8.5%) = 22%

new market price of the stocks = $7 / 22% = $31.818 = $31.82

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7 0
3 years ago
What features of the 100 Yen Sushi House service delivery system differentiate it from the competition, and what competitive adv
BartSMP [9]

Answer:

The summary and as per the query is defined in the following portion of the clarification.

Explanation:

The key characteristics including its 100 yen sushi management of service distribution system are its approaches to meal preparation and facilities on the manufacturing process. The client is also involved throughout the supply chain. The regular price, the conveyor belt mechanism throughout the location, which passes across the commercial counter, is three to four chefs on the floor.

The benefits of this are the people that follow:

  • High-tech independence including the use of clear methods.
  • The positions that their operation involves repetition throughout their manufacturing method there might be other providers that could follow 100 yen sushi household operational efficiency. The distribution system used for the 100 yen sushi household delivery of services may also be regarded for car production.  
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8 0
3 years ago
The countries that have made the least use of securities markets are ________ and ________; in these two countries finance from
netineya [11]

Answer:

<u>Germany</u> and <u>Japan</u>

Explanation:

Financial intermediaries refer to the institutions which serve as a link between spenders and savers. Examples of financial intermediaries are banks, investment banks, pension funds, etc.

Securities markets refer to the markets which deal with the issuance of equity, debt and derivatives securities. Such issue of securities facilitates the raising of capital by businesses.

Direct finance usually takes place in capital markets dealing in securities with maturity period of more than an year, such as equity and bonds.

Indirect finance takes place through financial intermediaries such as banks, pension funds, etc. Such intermediaries remove the operation of middlemen between lenders and borrowers.

Germany and Japan have utilized their nation's bank credit based financial system.

3 0
3 years ago
In a perpetual average cost system: a. The average is determined by dividing the total number of units sold by the cost of units
Sedaia [141]

In a perpetual average cost system a new weighted-average unit cost is calculated each time additional units are purchased.

Option B is correct

Explanation:

"Average" represents the mean expense of production items from the sale time below the perpetual method. This marginal cost is compounded by the numbers of distribution units, deducted from the stock in the possession and debited to the Expense of Items Sold balance.

Divide the prices of goods available on the market by the amount of available on the market to be using the median weighted practice, which results in the total average cost of units. The cost of the product available on the market is the amount of the original production and net sales in this estimate.

8 0
3 years ago
For the first time in two years, Big G (the cereal division of General Mills) raised cereal prices by 4 percent. If, as a result
bearhunter [10]

Answer:

b. inelastic

c. Yes - it decreased

Explanation:

Elasticitiy of demand measures the responsiveness of quantity demanded to changes in price.

Elasticity of demand = percentage change in quantity demanded/ percentage change in price

= -2/4 = -0.5

The absolute value is 0.5

If the absolute value of the coffiecnet of elasticity of demand is less than one, demand is inelastic.

Demand is inelastic if a change in price has no effect on quantity demanded .

We can tell that the quantity demanded fell because of the negative sign in front of the percentage change in quantity demanded.

I hope my answer helps you

7 0
3 years ago
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