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Contact [7]
2 years ago
12

Company A has a beta of 0.70, while Company B's beta is 1.20. The required return on the stock market is 11.00%, and the risk-fr

ee rate is 4.25%. What is the difference between A's and B's required rates of return?
Business
2 answers:
Serhud [2]2 years ago
6 0

The difference between A's and B's required rates of return is E. 3.38%

<h3>Explanation: </h3>

Company A has a beta of 0.70, while Company B's beta is 1.20.  The required return on the stock market is 11.00%, and the risk-free rate is 4.25%.  What is the difference between A's and B's required rates of return?  (Hint: First find the market risk premium, then find the required returns on the stocks.)

a..2.75%

b. 2.89%

c. 3.05%

d. 3.21%

E. 3.38%

The Capital Asset Pricing Model (CAPM) is the relationship between systematic risk and expected return for assets, and particularly stocks. CAPM is widely used to pricing risky securities throughout finance and generating expected returns for assets given the risk of those assets and cost of capital.

Company A has a beta of 0.70

Company B's beta is 1.20.  

The required return on the stock market is 11.00%,

The risk-free rate is 4.25%.  

Therefore Risk Premium is: 11% - 4.25% = 6.75%.

Feed into the CAPM and you can find the returns of  8.975% for A and 12.35% for B

A rate of return is the net gain or loss on an investment over a specified time period.  A rate of return is expressed as a percentage of the investment's initial cost.

Learn more about rates of return brainly.com/question/1789817

#LearnWithBrainly

kiruha [24]2 years ago
5 0

Answer:

The difference between A and B Required Rate of Return is 3.38%

Explanation:

As we know that required rate of return we use CAPM formula that is

Required rate of return = Rf + (Rm - Rf) x Beta

Stock A Return = 4.25% + (11% - 4.25% )  x 0.70

Stock A return = 8.98%

Stock B Return = 4.25% + (11% - 4.25%) x 1.20

Stock B Return = 12.35%

Difference between Return = Stock B Return - Stock A Return

Difference between Return = 12.35% - 8.98%

Difference between Return = 3.38%

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natita [175]

Answer:

revenue cycle

Explanation:

Dolores Yu provides a payroll processing business. According to question, service has been rendered and now its time to collect bills for those service.

Since revenue cycle is capturing of bills and payment for product or service rendered. The work mentioned in the problem is part of revenue cycle.

5 0
2 years ago
Paloma Company establishes a $200 petty cash fund on Jan 1. On January 8, the fund shows $107 in cash along with receipts for th
Tanya [424]

Answer:

(1) establish the fund on January 1,

  • Dr Petty cash fund 200
  •     Cr Cash 200

(2) reimburse it on January 8

  • Dr Postage expenses 39
  • Dr Transportation expenses 12
  • Dr Delivery expenses 14
  • Dr Miscellaneous expenses 28
  •     Cr Cash 93

(3) both reimburse the fund and increase it to $350 on January 8, assuming no entry in part 2.

  • Dr Petty cash fund 150
  • Dr Postage expenses 39
  • Dr Transportation expenses 12
  • Dr Delivery expenses 14
  • Dr Miscellaneous expenses 28
  •     Cr Cash 243

The only difference between part 2 and 3 is that the Petty cash fund is increased by $150, and cash decreases by $243 instead of $93.

6 0
3 years ago
The break-even point is the sales level at which a company_______________.a. incurs a loss. b. contribution margin equals fixed
Neporo4naja [7]

Answer:

b. contribution margin equals fixed costs

e. has a profit of $0.

Explanation:

The break even point is the point in which the firm has no profit and no loss situation. When it meets we called as break even point.

So, the break even point is the point at which the profit is zero plus the contribution margin equals to the fixed cost i.e means

Contribution margin = Fixed cost

Sales - variable cost = Fixed cost

If both are equal so it seems the profit is zero

4 0
3 years ago
If you expect the price of gold to increase in the near​ future, your demand for gold today will increase.A. TrueB. False
9966 [12]

Answer:

A. True

Explanation:

Gold is a valuable commodity acquired for various reasons.  In economists, gold is as a store of value and an investment tool. Gold is traded in the financial markets like other valuable metals such as silver and copper.

If investors anticipate the price of gold to rise in the near future, demand for gold will increase. Gold will be bought as an investment asset for speculative purposes. Traders will buy gold and the current prices and wait to sell when the prices rise. Investors take advantage of price movement to make profits.

5 0
3 years ago
A $298 petty cash fund has cash of $32 and receipts of $247. The journal entry to replenish the account would include credit to
Nikolay [14]

The journal entry to replenish the petty cash account is credit to Cash for $266.

<h3>How would petty cash be replenished?</h3>

The amount that needs to be replenished is:

= Petty cash fund - cash

= 298 - 32

= $266

This amount needs to be taken from the cash account which is why the cash account will be credited with $266.

Find out more on the petty cash fund at brainly.com/question/27585546

#SPJ1

7 0
2 years ago
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