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Vikki [24]
3 years ago
6

Stock R has a beta of 1, Stock S has a beta of 0.45, the required return on an average stock is 9%, and the risk-free rate of re

turn is 3%. By how much does the required return on the riskier stock exceed the required return on the less risky stock? Round your answer to two decimal places.
Business
1 answer:
insens350 [35]3 years ago
4 0

Answer:

3.00%

Explanation:

Required return of a stock = Risk free rate of return + (average required return - Risk free rate of return) (Beta of the stock)

Required return of Stock R = 0.03 + [ (0.09 - 0.03) * 1)] = 0.09

Required return of Stock S = 0.03 + [ (0.09 - 0.03) * 0.45)] = 0.06

Difference = 0.09 - 0.06 = 0.03, or 3%

Therefore, the required return on the riskier stock will exceed the required return on the less risky stock by 3.00%.

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(a) True

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3 0
3 years ago
Product differentiation and advertising are profitable ventures only when:
dalvyx [7]

Answer:

Product differentiation and advertising are profitable ventures only when:

the gain in total revenue outweighs the extra cost

Explanation:

When Company XYZ differentiates its product from competitors' through trademarks and other differentiating factors and embarks on advertising, it must watch out for cost overrun.  The undertaking for the product differentiation and advertising should be able to generate more revenue than the costs.  This will make Company XYZ determine that its differentiation and advertising make economic meaning by producing positive NPV.

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3 years ago
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egoroff_w [7]

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 b. an economic profit of 100%.

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I hope my answer helps you

5 0
3 years ago
A content analysis of an organization's messages, readability studies, and readership surveys are all tools used to conduct a(n)
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Learn more about readability here:-brainly.com/question/3923453

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2 years ago
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