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
Yuri [45]
3 years ago
11

The common stock of Alpha Manufacturers has a beta of 1.18 and an actual expected return of 13.33 percent. The risk-free rate of

return is 3.3 percent and the market rate of return is 12.20 percent. Which one of the following statements is true given this information?
A. The stock has less systematic risk than the overall market.
B. To be correctly priced according to CAPM, the stock should have an expected return of 13.56 percent.
C. The actual expected stock return will graph above the security market line; thus the stock is underpriced.
D. The actual expected stock return indicates the stock is currently overpriced.
Business
1 answer:
nekit [7.7K]3 years ago
5 0

Answer:

D. The actual expected stock return indicates the stock is currently overpriced.

Explanation:

The actual rate of return of this stock = 13.33%

Rate of return using CAPM:

r = risk free rate + beta(Market return- risk free rate)

risk free = 3.3% or 0.033 as a decimal

beta = 1.18

market return = 12.20% or 0.1220 as a decimal

r = 0.033 + 1.18(0.1220 - 0.033)

= 0.033 + 0.10502

= 0.1380 or 13.80%

Since rate of return and price of a stock have inverse relationship, the actual rate of return is lower meaning that the stock is currently overpriced.

You might be interested in
The top management of Wisniewski Automobile Parts Inc. has decided that the company's objective for the next two years will be t
Mkey [24]

Answer:

Strategic planning

Explanation:

Strategic planning is defined as the process by which a business outlines direction and strategy. It also involves decision on how the business will allocate it's resources to achieve its strategic goals.

Strategic plan involves formulation of mission, vision, and plan of action that will make the business achieve set goals.

In this scenario top management of Wisniewski Automobile Parts Inc. has decided that the company's objective for the next two years will be to expand the overall business internationally. This is the strategic plan of the business for the next two years

3 0
3 years ago
Name any three (3) tests that Hornbill Holdings can use to assess the graduates
nadya68 [22]

Three tests that can be used to assess graduates include:

  • Skills and knowledge psychometric tests.
  • Ability and aptitude psychometric tests.
  • Personality tests.

<h3>What are some tests that can be used to test graduates?</h3>

A skills and knowledge psychometric test will allow Hornbill Holdings to find out how knowledgeable a graduate is in their industry and its processes.

They can also use an ability and aptitude test to find out how adaptive the graduate is to new situations.

Personality tests can then find out if the graduate has the right type of personality for the culture at Hornbill Holdings.

Find out more on graduate testing at brainly.com/question/16321787.

5 0
2 years ago
Who hates me? be honest
ipn [44]

Answer:

no one hates you

Explanation:

7 0
2 years ago
Read 2 more answers
According to the law of comparative advantage, what should be the distinguishing characteristics of the goods a nation imports?
aliina [53]

Answer:

The correct answer is option C.

Explanation:

The law of comparative advantage states that a country will produce and export the commodity it has a comparative advantage in producing.  

In other words, if the country can produce good cheaply or at a lower opportunity cost.  

The good that cannot be produced cheaply or has a higher opportunity cost will be imported from the country that produces it cheaply.

6 0
2 years ago
New Morning Bakery is in the process of closing its operations. It sold its two-year-old bakery ovens to Great Harvest Bakery fo
spayn [35]

Answer:

The balance in the accumulated depreciation account at the end of the second year is $146,000.

Explanation:

Straight line method charges a <u>fixed depreciation charge</u> on the asset during its period of use.

Depreciation Expense (Straight line) = Cost - Residual Amount ÷ Estimated Useful life

                                                             = $778,000 - $48,000 ÷ 10

                                                             = $73,000

Therefore, for each year, a depreciation expense of $73,000 is charged to profit an loss.

Accumulated Depreciation Calculation :

Depreciation Expense : Year 1     $73,000

Depreciation Expense : Year 2    $73,000

Total Expense                              $146,000

5 0
2 years ago
Other questions:
  • The Talbot Corporation makes wheels that it uses in the production of bicycles. Talbot's costs to produce 100,000 wheels annuall
    5·1 answer
  • Consumer surplus
    14·1 answer
  • Why might you complete a 1040 intead of a 1040EZ?
    7·1 answer
  • By the end of this year
    13·1 answer
  • If a company purchases plastic that they will melt and form into milk jugs that they will then sell to milk plants, the cost of
    5·1 answer
  • At Schwinn, managers of various new departments in the company were told, "Go out and shape the department the way you feel is b
    8·1 answer
  • The Uptowner will pay an annual dividend of $3.26 a share next year with future dividends increasing by 2.8 percent annually. Wh
    12·1 answer
  • A holistic lifecycle for developing security architecture that begins with assessing business requirements and subsequently crea
    14·1 answer
  • You are hired by the Chair of the Federal Reserve to manage the trading desk at the New York Fed and the Chair tells you that he
    13·1 answer
  • Consider the following activities that take place in a veterinary clinic.
    11·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!