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Dima020 [189]
3 years ago
11

A stock has an expected return of 13.5 percent, its beta is 1.40, and the expected return on the market is 11.5 percent. What mu

st the risk-free rate be? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Business
1 answer:
uranmaximum [27]3 years ago
6 0

Answer:

The risk free rate is 6.50%

Explanation:

The required rate of return is the minimum return that investors demand/expect on a stock based on the systematic risk of the stock as given by the beta. The expected or required rate of return on a stock can be calculated using the CAPM equation.

The equation is,

r = rRF + Beta * (rM - rRF)

Where,

  • rRF is the risk free rate
  • rM is the return on market

As we know the figures for r, Beta and rM, we will input these figures in the equation to calculate risk free rate.

Let risk free rate be x.

0.135 = x + 1.4 * (0.115 - x)

0.135 = x + 0.161 - 1.4x

0.135 - 0.161  =  x - 1.4x

-0.026  =  -0.4x

-0.026 / -0.4 = x

x =  0.065 or 6.50%

r = 0.1475 or 14.75%

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Answer:

still be liable for Hala's contract.

Explanation:

Any contract entered into by any of the partners, before the dissolution of a partnership business is deemed legal hence binding on the partners. This means that the partners will still be liable for the new contract in line with their partnership status.

Although, before a partnership business can be dissolved, at least one of partners must give a notice of intent. If in the process of giving the notice, another member enters in a new contract, such will be valid and partners will still be held liable because the business has still not been dissolved in the eye of the law.

Any contract entered into by any partner in a partnership business aftet dissution becomes illegal hence not binding on other members.

6 0
3 years ago
Outdoor Luggage Inc. makes high-end hard-sided luggage for sports equipment. Data concerning three of the company’s most popul
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Answer:

                                                       Ski             Golf           Fishing

                                                       Guard       Guard       Guard

selling price                                   $260         $330        $205

variable cost                                  $120          $180         $135

contribution margin                       $140          $150         $70

machine time                                 9 min.        12 min.      11 min.

lbs. of pellets                                  12              7                11

total machine time is the constraint in the production process

1a)

contribution margin per                 $933.33   $750         $381.82

machine hour

1b)

ski guard since its contribution margin per machine hour is much higher than the rest of the products

1c)

fishing guard since its contribution margin per machine hour is much lower than the rest of the products

2a)

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                                                       Guard       Guard       Guard

contribution margin per                 $11.67      $21.43       $6.36

lbs. of pellets

2b)

Golf guard since its contribution margin per lb. of pellets is much higher than the rest of the products

2c)

fishing guard since its contribution margin per lb. of pellets is much lower than the rest of the products

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Golf Guard ($150)

4 0
3 years ago
Suppose two factors are identified for the U.S. economy: the growth rate of industrial production, IP, and the inflation rate, I
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Answer:

The new rate of return is 15.4%

Explanation:

The revised estimate on the rate of return on

the stock would be:

• Before

• 14% = α +[4%*1] + [6%*.4]

α = 7.6%

• With the changes:

• 7.6% + [5%*1] + [7%*.4]

The new rate of return is 15.4%

7 0
3 years ago
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<span>The Fair Debt Collection Practices Act</span>
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