The market risk premium of Fund P will be 5.5%.
<h3>How to calculate the market risk premium?</h3>
It should be noted that as per CAPM, the return in stock will be:
= Risk free rate + Beta × Market risk premium
8.90% = 4.5% + 0.8 × Market risk premium.
Market risk premium = 5.5%
In conclusion, the market risk premium of Fund P will be 5.5%.
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Explanation:
An oligopoly can be defined as an imperfect competition market structure, it works when in an economic sector there are few companies offering a good or service, that is, the market is homogeneous and with differentiated services, as companies seek a degree differentiation to win customers.
Some characteristics of the oligopoly are: few price variations, which can affect the consumer, since there are few companies operating in the oligopolistic market, the possibilities of choice are reduced. There is also the difficulty of entry for new competitors, since there are few dominant companies in the market and we can also mention the dependence between companies in the market in which there is an oligopoly, since the actions of one will consequently affect the entire market and the companies present .
The oligopoly arises when there is an imbalance between supply and demand, which means that the active companies have greater control over the market and the prices charged.
Answer:
The use of data aggregation leads to overstatement of the concentration and Herfindahl indices
while the use of National/state data leads to understatement of the degree of concentration in local markets.
Explanation:
The ratio of concentration and Herfindahl indices computed are mainly made up of foreign players while the contributions of small local unorganized players are not considered, which leads to the increase in the value of indices and ratios been used, ( i.e. The use of data aggregation ) . hence the overstatement of the actual level.
The understatement of the degree of concentration in local markets happens because of the use of national and state data while computing the concentration in the local markets like gasoline and this is mainly caused by the presence of fewer industries in the market. The state and national data does not reflect the true concentration in the local market hence the degree of concentration is understated at the local level.
Answer:
Conceptual framework
The modern world is an OLRT (On-Line Real Time) world. The days of prolonged waiting for a report on the performance and financial position of a business are past. Time is money and time is limited. Information should be available as events occur because one event can mean the difference between success and failure.
The problem poses three questions and expects answers. The answers to all three questions are in the affirmative:
Financial information would be more useful, more relevant and more reliable in an OLRT electronic, paperless world
Answer:
Fly Corporation
The stock price will not be affected by the accounting change.
Explanation:
This opinion is based on the assumption that the capital markets are efficient. Therefore, the stock's market price will reflect all available and relevant information. Since all the necessary information is already incorporated into the stock price, the CEO of Fly Corporation cannot beat the market by the change in accounting method, and the stock price will not be undervalued or overvalued. Moreover, the change in accounting method only shifts the timing for reporting income.
