Answer:
P0 = $14.4683 rounded off to $14.47
Explanation:
To calculate the market price of the stock today, we will use the constant growth model of DDM. The constant growth model calculates the values of the stock today based on the present value of the expected future dividends from the stock. The formula for price today under this model is,
P0 = D0 * (1+g) / (r - g)
Where,
- D0 is the dividend today
- g is the constant growth rate
- r is the required rate of return on the stock
We first need to calculate r 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
r = 0.06 + 1.6 * (0.147 - 0.06)
r = 0.1992 or 19.92%
Using the price formula for DDM above, we can calculate the price today to be,
P0 = 1.9 * (1+0.06) / (0.1992 - 0.06)
P0 = $14.4683 rounded off to $14.47
Answer:
can be thought of as a bank withholding a portion of its total deposits that are not loaned out.
Explanation:
Fractional reserve banking is when banks accepts deposits from customers and lend out only a fraction of the deposits. The remaining are kept as reserves.
The central bank requires bank to keep certain amount of money as reserves in order to meet unforeseen circumstances
Asset transformation by financial intermediaries is the purchase of a primary asset or securities and their transformation into other assets in terms of risk and maturity.
A type of transformation where banks use deposits (mobilized funds) to generate income by pooling deposits to provide loans. More precisely, asset transformation is the process of converting bank liabilities (deposits) into bank assets (loans). Deposits are inherently subject to withdrawal by customers (depositors) at any time or as set out in the deposit contract/agreement. Loans are bank assets because they represent money that the bank lends and expects to receive back in the form of repayment of principal and interest. As such, banks perform asset transformation by providing long-term and short-term loans, with the interest differential being their transformation returns. Banks and other financial institutions usually perform asset transformation by offering their customers various financial products on both sides of the balance sheet, such as deposits, investment and loan products, etc.
Learn more about risk and maturity.
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The major purpose of the Federal Reserve buying government securities in open market operations is to allow banks to increase their lending. The Federal Reserve system is the central bank of the United States. It performs different functions to keep the effectiveness of the U.S. economy and the public interest operational.
Answer: double coincidence of wants
Explanation:
Coincidence of wants simply refers to a situation whereby two parties have something that the other person wants, therefore they then exchange the products they have. It should be noted that no financial compensation is involved. This simply has to do with trade by barter.
If William performs plumbing upgrades for Patricia in exchange for her incorporating his business, then their double coincidence of wants will be satisfied.
