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shusha [124]
3 years ago
14

You are analyzing a stock that has a beta of 1.25. The​ risk-free rate is 3.7 % and you estimate the market risk premium to be 5

.9 %. If you expect the stock to have a return of 13.2 % over the next​ year, should you buy​ it? Why or why​ not? The expected return according to the CAPM is nothing​%. ​(Round to two decimal​ places.) Should you buy the​ stock? ​(Select the best choice​ below.)
Business
1 answer:
Anna71 [15]3 years ago
4 0

Answer:

6.45% and no

Explanation:

As we know that

Expected rate of return = Risk-free rate of return + Beta × (Market rate of return - Risk-free rate of return)

= 3.7% + 1.25 × (5.9% - 3.7%)

= 3.7% + 1.25 × 2.2%

= 3.7% + 2.75%

= 6.45%

he Market rate of return - Risk-free rate of return) is also known as the market risk premium and the same is applied.

Now the next year expected rate of return is 13.2% so based on this the investor should not buy this stock as the calculated expected rate of return is less than the desired expected rate of return

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The most socially responsible companies establish _____ for their vendors, setting clear policies for human rights, wages, safet
AfilCa [17]
In order to help the student expand his/her knowledge I will help answer the question. This in hope that the student will get a piece of knowledge that will help him/her through his/her homework or future tests.

The most socially responsible companies establish codes of conduct for their vendors, setting clear policies for human rights wages, safety, and environmental impact. In fact many of this companies have this establish today.
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I hope it helps, Regards.</span>
3 0
4 years ago
Star Corp. had the following accounts and balances in its general ledger as of December 31:
Alex

Answer:

=$ 25,500

Explanation:

cash equivalents will be petty cash + cash at bank

= 500+20,000+5000

=$ 25,500

Cash or cash equivalent refers to assets held in the form of cash or can easily convert into cash in less than 90 days. Examples of cash include petty cash, cash in hand, cash in the bank, and debt securities whose maturity is within 90 days. Cash or cash equivalent appears at the top on the list of assets in a balance sheet.

Marketable debt securities are short-term to bond issued by a corporation and held by another company. They are listed as a current asset if they are to be sold within one year to long term investment if they are expected to last longer. Marketable equity securities are capital instruments. They are listed as current assets if they are to be liquidated in one year or long term investment if longer.

8 0
4 years ago
Concrete hardens best when it is
elixir [45]
When it first gets wet then later down the way u wish then let it dry
5 0
3 years ago
Brooks Corporation can sell all the units it can produce of either Plain or Fancy but not both. Plain has a unit contribution ma
Rus_ich [418]

Answer:

D. Make Plain which creates $6 more profit per machine hour than Fancy does

Explanation:

Brooks Corporation can sell all the units it can produce of either Plain or Fancy but not both. Plain has a unit contribution margin of $72 and takes two machine hours to make and Fancy has a unit contribution margin of $90 and takes three machine hours to make. There are 2,400 machine hours available to manufacture a product.

Brooks should make Plain which creates $6 more profit per machine hour than Fancy does.

4 0
3 years ago
You manage an equity fund with an expected risk premium of 12.4% and a standard deviation of 38%. The rate on Treasury bills is
timama [110]
  • The expected return = = 12.84 %.
  • The standard deviation = 22.8 %.

<u>Explanation</u>:

On the client's portfolio (total investment = 120 K + 80 K = 200 K,  

  • The expected return

                    = (12.4 %risk premium + 5.4 %risk free return) \times (120 K / 200 K) + 5.4 % \times (80 K / 200 K)

                    = 17.8 % \times 0.6 + 5.4 % \times 0.4

                    = 12.84 %.

  • The standard deviation would be = 38 % \times 0.6 + 0% \times 0.4

                                                                  = 22.8 %.

4 0
3 years ago
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