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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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Steve Colburn's portable sawmill used 100% for business, was completely destroyed by fire. The sawmill had an adjusted basis of
pashok25 [27]

Answer: $35,000

Explanation:

A casualty loss is simply a loss that an individual or business incurs when a property is damaged, or destroyed due to an unexpected or sudden event like fire, volcanic eruption, flood etc.

Here, Steve's casualty loss will be gotten when we compare both his adjusted basis and the fair market value and then we choose the lesser one. Since $35000 is lesser than $50000, therefore the answer will be $35000.

8 0
3 years ago
It is January 2nd. Senior management of Digby meets to determine their investment plan for the year. The current long-term debt
atroni [7]

Answer:

A) Total investment for Digby will be $2,518,806

D) Long term debt will increase from $33,862,062 to $34,888,934

Explanation:

The current Long-term debt is $33,862,062

Digby issues new shares of 50,000 with stock price $20.54.

50,000 shares * $20.45 = $1,027,000

Assets of Digby will rise by,

Assets / Equity = 2.45

Assets / $1,027,000 = 2.45

Assets = 2.45 * $1,027,000

Assets = $2,516,150

6 0
3 years ago
Read 2 more answers
Maria has to choose between driving and taking a train to destination A. Travelling by train will cost her $400 and will take 4
dlinn [17]

Answer:

None of the options are correct

Explanation:

The train would cost her, which is computed as:

= Cost + (Hours × Opportunity Cost)

= $400 + (4 hours × $15 per hour)

= $400 + $60

= $460

The driving would cost her, which is computed as:

= Cost + (Hours × Opportunity Cost)

= $250 + (6 hours × $15 per hour)

= $250 + $90

= $340

Savings = Train Cost - Driving Cost

= $460 - $340

=$120

None of the options are correct as the she would save $120.

4 0
3 years ago
2 Static game ISuppose two players are playing a game, Even and Odd. Each player has a penny and mustsecretly turn the penny to
Andreyy89

Answer: The answers are provided below.

Explanation:

1. A payoff matrix is a table whereby strategies of one player are listed in the rows and the strategies of the other player is listed in the columns while the cells show the payoffs to each player in such a way that the payoff of the row player is first listed.

The payoff matrix for this game has been attached.

2. In game theory, a strategic dominance occurs when a strategy is better than the strategy of another player. In this scenario, even does not have a dominant strategy because both strategies are providing equal payoffs for the pure strategy.

4 0
3 years ago
Each of two stocks, C and D, are expected to pay a dividend of $3 in the upcoming year. The expected growth rate of dividends is
Stels [109]

Answer:

Intrinsic value of Stock C is 300

Explanation:

given data

expected pay dividend = $3

growth rate of dividends = 9%

stock C require a rate of return = 10%

stock D require a rate of return = 13%

solution

we get here intrinsic value by the DDM method

intrinsic value = Upcoming Dividend ÷ ( Required rate of return - Growth rate of stock )  .................1

intrinsic value = \frac{3}{(0.10-0.09)}    

intrinsic value = \frac{3}{0.01}  

intrinsic value = 300

so intrinsic value of Stock C is 300

8 0
3 years ago
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