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Daniel [21]
3 years ago
8

If Professor Siegel is correct that stocks are less risky than bonds, then the risk premium on stock may be zero. Assuming that

the risk-free interest rate is 2.5 percent, the growth rate of dividends is 1 percent and the current level of dividends is $70, use the dividend-discount model to compute the level of the S
Business
1 answer:
Ulleksa [173]3 years ago
5 0

If Professor Siegel is correct that stocks are less risky than bonds, then the risk premium on stock may be zero. Assuming that the risk-free interest rate is 2.5 percent, the growth rate of dividends is 1 percent and the current level of dividends is $70, use the dividend-discount model to compute the level of the S&P 500 that is warranted by the fundamentals.

Instruction: Round your response to 2 decimal places.

The level of the S&P 500 is

Answer:

Dividend discount model:

Price= D(1+g)/r-g

g=growth rate 1%

r= as given in question risk free rate 2.5%

D₀= $70

D₁=$70(1+0.01)  with growth rate

Solution:

70(1+0.01)/(0.025-0.01)

=$4713.33

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A credit entry was recorded for unearned revenue and a debit for cash. What does this entry indicate?
rusak2 [61]

Answer:

This means that there is an increase in cash(cash has been collected). And for the unearned revenue which is a liability, there is an increase in the liability

Explanation:

This means that there is an increase in cash(cash has been collected). And for the unearned revenue which is a liability, there is an increase in the liability.

Note: Debit side increases asset(cash) and expenses while credit side decreases liability,income and equity.

Credit side decreases asset(cash) and expenses while debit side increases liability,income and equity.

7 0
3 years ago
Washington Inc. issued $705,000 of 6%, 20-year bonds at 98 on January 1, 2009. Through January 1, 2017, Washington amortized $8,
Mashcka [7]

Answer:D.$14,100 gain

Explanation:

The par value of a bond is $100 when it's issued below the price it's issued at a discount which is a loss to the firm and when it's issued above the par value, it's issued at a premium which is a gain.

The issue of $705,000 means 7050 numbers were issued and retiring it $102 means at a premium of $2 per bond and a total of N14,100 gain.

7 0
3 years ago
An investor buys a call at a price of $4. 50 with an exercise price of $40. at what stock price will the investor break even on
Maksim231197 [3]

Break-even price of call option = Exercise price + Premium Paid

So,

Break-even Stock Price = 40 + 4.50 = $44.50

A stock market, stock market, or stock market, is a collection of buyers and sellers of shares (also called stocks) that represent ownership of a company. This includes securities listed on public stock exchanges and stocks that trade only privately. B. Private company shares are sold to investors through equity crowdfunding platforms. Investments are typically made with an investment strategy in mind.

shares can be classified according to the country in which the company is located. For example, Nestlé and Novartis are based in Switzerland and traded on the SIX Swiss Exchange, so they can be considered part of the Swiss stock market. ) on the U.S. Stock Exchange.

Learn more about Stock here: brainly.com/question/1166179

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4 0
1 year ago
A change in location with respect to a reference point is ___ <br> PLEASE HELP!!!
balandron [24]

Answer:

Motion.

Explanation:

Motion can be defined as a change in location with respect to a reference point.

This ultimately implies that, motion would occur as a result of a change in location (position) of an object with respect to a reference point or frame of reference i.e where it was standing before the effect of an external force.

Mathematically, the motion of an object is described in terms of acceleration, time, distance, speed, velocity, displacement etc.

3 0
3 years ago
Suppose the price level reflects the number of dollars needed to buy a basket of goods containing one can of soda, one bag of ch
Virty [35]

Answer:

Year 1, Year 2 purchasing power = 8 , 9 (respectively). As price level fall, value of money<u> Increases </u>

Explanation:

Year one purchasing power = Money ($) / Price per basket = 72 / 9 = 8

Year two purchasing power = Money ($) / Price per basket = 72 / 8 = 9

This implies that, as price level falls (from 9 to 8 here) ,the value of money ie purchasing power increases (from 8 to 9)

8 0
3 years ago
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