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
Sphinxa [80]
3 years ago
14

8-12 REQUIRED RATE OF RETURN Suppose rRF 9%, rM 14%, and bi 1 3. a. What is ri, the required rate of return on Stock i? b. Now s

uppose that rRF (1) increases to 10% or (2) decreases to 8%. The slope of the SML remains constant. How would this affect rM and ri? c. Now assume that rRF remains at 9%, but rM (1) increases to 16% or (2) falls to 13%. The slope of the SML does not remain constant. How would these changes affect ri?
Business
1 answer:
Nat2105 [25]3 years ago
3 0

Answer:

a = 0.74 or 74%

b(1) = 0.75 or 75%

b(2) = 0.73 or 73%

c(1) = 1 or 1%

c(2) = 0.61 or 61%

Explanation:

The stock i has a risk free rate of 9% with a market return of 14% and beta of 13, using the formula we get,

ri = rRF + bi x (rM – rRF)

Where rRF=9/100=0.09

bi =13

rm =14/100=0.14

Putting the values into the formula

= 0.09 + 13 x (0.14 – 0.09)

= 0.74 or 74%

b. (1)

Ri = rRF + bi x (rM – rRF)= 0.10 + 13 x (0.14 – 0.09)= 0.75 or 75%

Here the slope of SML remains constant, meaning the market risk premium will not change. As a result, the required return will increase by 1%.

b(2)

Ri = rRF + bi x (rM – rRF)= 0.08 + 13 X (0.14 – 0.09)= 0.73 or 73%

Here, the slope of SML remains constant, meaning the market risk premium will not change. As a result the required return will decrease by 1%.

c. (1)

Ri = rRF + bi x (rM – rRF)= 0.09 + 13 x (0.16 – 0.09)= 1 or 1%

Here, the slope of SML does not remain constant, meaning the market risk premium will change. As a result, the required return will increase.

(2)Ri = rRF + bi x (rM – rRF)= 0.09 + 13 x (0.13 – 0.09)=0.61 or 61%

Here, the slope of SML remains constant, meaning the market risk premium will not change. As a result, the required return will decrease by 13%.

You might be interested in
3. Which of the following is not a characteristic of a good citizen?
Elan Coil [88]

Answer:

Owning property

Explanation:

Its the only one that affects solely 1 person rather than benefit the community as a whole

6 0
3 years ago
What are negative effects of importing goods
kotykmax [81]
There are several negative effects..It is usually more  expensive, it will also reduce GDP .ect
5 0
3 years ago
Read 2 more answers
Jack offers to sell Jill his automobile for $10,000. Jill says she must think about but that she is not rejecting his offer. Jil
wel

Answer:

The sale of the car is canceled

Explanation:

For two reasons I think this. Jack had already sent out a letter to jill stating that the car is no longer for sale. As the current owner of the vechile he has the right at any point in time to draw out of the deal up till the actual signing over of the car.  

3 0
3 years ago
When you are writing to reject a job​ application, which of these is considered the BEST​ strategy?
Hunter-Best [27]

Answer:

D. Use an indirect approach to soften the blow.

Explanation:

Even though there really is no perfect method or strategy when rejecting a job application, many companies usually agree on using an indirect approach to soften the blow. This saves the receiver of the rejection from the pain that they may otherwise feel from a direct rejection, since a direct approach will make them feel as though the rejection is completely their fault.

I hope this answered your question. If you have any more questions feel free to ask away at Brainly.

3 0
3 years ago
Zorn Co. budgeted $600,000 of factory overhead cost for the coming year. Its plantwide allocation base, machine hours, is budget
Amanda [17]

Answer:

False.

Explanation:

Given: Total budgeted factory overhead cost = $600000.

           Plantwide allocation base=  100000 hours.

Now, finding plantwide factory overhead rate.

Formula; Plantwide factory overhead rate= \frac{total\ budgeted\ factory\ overhead\ costs }{plantwide\ allocation\ base.}

⇒ Plantwide factory overhead rate= \frac{600000}{100000} = \$ 6 per\ hours

Hence, Zorn´s plantwide factory overhead rate is $6 per hour not $3 per hour.

8 0
3 years ago
Other questions:
  • Avery Company has two divisions, Polk and Bishop. Polk produces an item that Bishop could use in its production. Bishop currentl
    12·1 answer
  • We are evaluating a project that costs $735,200, has an eight-year life, and has no salvage value. Assume that depreciation is s
    5·1 answer
  • What is required to have a legally valid contract?
    7·2 answers
  • Your colleague anshul has to give a presentation to the whole company. what tip should you give him about managing his nerves?
    11·1 answer
  • Assume that the full-employment level of output is $2,000 and the price level associated with full-employment output is 100. Als
    15·1 answer
  • Rendezvous Cafe's suit against Sanitary Waste Services, Inc., the court issues a judgment in Rendezvous's favor. The judgment ca
    12·1 answer
  • When interest rates fall a. firms want to borrow more for new plants and equipment and households want to borrow less for homebu
    12·1 answer
  • At equilibrium in a market for a product, the total revenues received by sellers equal the
    12·1 answer
  • Suppose Mattel, the producer of Barbie dolls and accessories (sold separately), has two types of consumers who purchase its doll
    11·1 answer
  • During the current month, Wacholz Company incurs the following manufacturing costs.
    5·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!