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3 years ago

Which one of the following should earn the most risk premium based on CAPM?

Business

1 answer:

Nina [5.8K]3 years ago

5 0

Answer:

The portfolio with a beta of 1.38 should earn the most risk premium based on CAPM.

The correct answer is B

Explanation:

A diversified portfolio with returns similar to the overall market will not earn the most risk premium because its beta is equal to 1.

A stock with a beta of 1.38 produces the most risk premium because any stock with the highest beta gives the highest risk-premium. This is the correct answer.

A stock with a beta of 0.74 does not provide the highest risk premium.

Us treasury bill does not provide any risk premium since it is the risk-free rate.

A portfolio with a beta of 1.01 does not produce the highest risk premium.

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Sheridan, Inc., has net income of $15,300,000 on net sales of $450,000,000.The company has total assets of $125,000,000 and stoc

jasenka [17]

Answer:

(a) 0.1224

(b) 0.3825

Explanation:

Given that,

Net income = $15,300,000

Net sales = $450,000,000

Total assets = $125,000,000

Stockholders’ equity = $40,000,000

(A) Return on assets:

= Net income ÷ Total assets

= $15,300,000 ÷ $125,000,000

= 0.1224

(b) Return on equity:

= Net income ÷ Stockholders’ equity

= $15,300,000 ÷ $40,000,000

= 0.3825

8 0

4 years ago

Home Products, Inc., is planning the introduction of a new food dryer. To compete effectively, the dryer would have to be priced

lys-0071 [83]

Answer:

The Target cost per dryer will be $35 per dryer

Explanation:

First, we need to calculate the required return

Required return = Investment x Required rate of return

Where

Investment = $600,000

Required rate of return = 25%

Placing values in the formula

Required return = $600,000 x 25% = $150,000

Now calculate the return per dryer

Return per dryer = Required return / Expected sale = $150,000 / 30,000 = $5 per dryer

Now use following formula to calculate the target cost per dryer

Return Per dryer = Selling price per dryer - Target cost per dryer

$5 per dryer = $40 per dryer - Target cost per dryer

Target cost per dryer = $40 per dryer - $5 per dryer

Target cost per dryer = $35 per dryer

8 0

3 years ago

Limited partners in a company

seropon [69]

C serve only as investors, as general partners take on all the risk and operation of the company, while limited partners invest their money, but don’t take part in the decisions of the company.

Hope this helps!

5 0

3 years ago

Which of the following does NOT match the landform with the process that created it?

dlinn [17]

Answer: The answer would be 1

Explanation: Glaciers are formed when snow piles on top of more snow, creating a dence mass of snow and ice

8 0

3 years ago

Read 2 more answers

Young Company budgets sales of $970,000, fixed costs of $30,600, and variable costs of $135,800. What is the contribution margin

jarptica [38.1K]

Answer:

contribution margin ratio= 0.86

Explanation:

Giving the following information:

Young Company budgets sales of $970,000

Variable costs of $135,800.

<u>To calculate the contribution margin ratio, we need to use the following formula:</u>

contribution margin ratio= contribution margin / sales

contribution margin ratio= (970,000 - 135,800) / 970,000

contribution margin ratio= 0.86

3 0

3 years ago