Answer:
a) The required rate of return is 14.75%
b) The expected return on this stock is 16% which is more than its required rate of return 14.75%, thus it is underpriced.
Explanation:
a)
Using the SML equation, we can calculate the required rate of return (r) of a stock.
r = rFR + β * (rM - rFR)
r = 6% + 1.25 * (13% - 6%)
r = 0.1475 or 14.75%
b)
The SML shows the return that is required on a security based on the risk is carries. Using SML we calculate the required rate of return which is the percentage return that investors require a security to provide.
If the expected return is greater than the required rate of return which means that security is expected to provide more than is required then the security is underpriced.
The expected return on this stock is 16% which is more than its required rate of return 14.75%, thus it is underpriced.
Answer:
a collection of screen names, like on your phone where you keep all your friends' phone number
Answer:
Debit Estimated Warranty Liability $14,000; credit Merchandise Inventory $14,000.
Explanation:
The journal entry is shown below:
Estimated Warranty Liability A/c Dr $14,000
To Merchandise Inventory $14,000
(Being the customer warranties is settled)
Since we have to settle the customer warranties, so we debited the estimated warranty liability account and credited the merchandise inventory account
Hence, all other options are wrong except last one
Answer:
B. To influence consumers to purchase
Explanation:
Answer:
a. $1,024.74
Explanation:
In this question, we use the present value formula which is shown in the spreadsheet.
The NPER represents the time period.
Given that,
Future value or par value = $1,000
Rate of interest = 6.1%
NPER = 8 years
PMT = $65
The formula is shown below:
= -PV(Rate;NPER;PMT;FV;type)
So, after solving this, the answer would be $1,024.74
