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lukranit [14]
3 years ago
12

A stock has an expected return of 16 percent, the risk-free rate is 6.4 percent, and the market risk premium is 7.3 percent.Requ

ired:What must the beta of this stock be? (Do not round intermediate calculations. Round your answer to 3 decimal places (e.g., 32.161).) Beta
Business
1 answer:
FrozenT [24]3 years ago
4 0

Answer:

The beta of the stock must be = 1.315 (approx).

Explanation:

Considering the following formula, we get:

expected return = 16

Risk free rate = 6.4

Market risk premium = 7.3

expected return=risk-free rate+beta* market risk premium

hence

16 = 6.4 + beta * 7.3

hence beta=(16 - 6.4)/7.3  =1.315(approx).

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Advice from most financial advisers states to spend no more than 28% of one's gross monthly income for one's mortgage payment, a
Lena [83]

Answer and Explanation:

The computation is shown below:

a. For the maximum amount that spend each month on mortgage payment is

= Gross annual income ÷ total number of months in a year × mortgage payment percentage

= $39,600 ÷ 12 months × 28%

= $924

b. . For the maximum amount that spend each month on total credit obligatons

= Gross annual income ÷ total number of months in a year × mortgage payment percentage

= $39,600 ÷ 12 months × 36%

= $1,188

c. Now the maximum amount spend for all other debt is

For monthly mortgage

= $924 × 70%

= $646.8

And, for mortgage debt

= $1,188 × 70%

= $831.60

4 0
3 years ago
Fatima is struggling in her job and is experiencing increased dissatisfaction. She related to you that her manager has been unfa
oee [108]

Answer:

Cognitive dissonance

Explanation:

Cognitive dissonance is a psychological notion when an individual experiences thoughts and emotions that are not consistent (no matter the environment). In this example, it was expected from Fatima to quit her job (since she hated the manager). In spite of that, she continued to work. That caused the cognitive dissonance in her behavior, as she changed her attitude.

6 0
3 years ago
It is July 16. A company has a portfolio of stocks worth $100 million. The beta of the portfolio is 1.2. The company would like
Anuta_ua [19.1K]

Answer:

A. The company should take Short position and

140 contract

B. The company should take Long position and 60 contract

B.

Explanation:

Calculation for what position that the company should take

Using this formula

Company position=(Beta of the portfolio*Change in beta of the portfolio) *Portfolio of stocks /Index futures price* Each Contract index times

Let plug in the formula

Company position =(1.2-0.5)*$100 million/2,000*250

Company position=0.7*$100 million/500,000

Company position=$70,000,000/500,000

Company position=140 contract

Therefore the position that the company should take will be SHORT position with 140 contract

B. Calculation for the increase in beta of the portfolio from 1.2 to 1.5 and what position tthr company should take in the futures contract and how many contracts

Using this formula

Company position=Increase in beta of the portfolio *Portfolio of stocks /Index futures price* Each Contract index times

Let plug in the formula

Company position =(1.5-1.2)*$100 million/2,000*250

Company position=0.3*$100 million/500,000

Company position=$30,000,000/500,000

Company position=60 contract

Therefore the company should take Long position and 60 contract

4 0
3 years ago
Fundamental analysis shows that Quadrangle Company is fairly valued. Then Quadrangle Company unexpectedly improves its productio
Anarel [89]

Answer:

D. Fundamental analysis would now show the corporation is undervalued. The fact that the price was unchanged is not consistent with the efficient markets hypothesis.

Explanation:

Under factors of production, we have Land ,labour ,capital and entrepreneur.

Labour are the prime movers of a business.If a new CEO with a good track record has been employed, then the value of the company will increase.

Technically, that Quadrangle Company has increased its production(which might mean that the goods and services they deliver to their clients has increased or the mode of delivery of services has been improved upon), the value is also meant to increase.

With all these indices in place, fundamental analysis will now show that the corperation is undervalued. so D

Fundamental analysis would now show the corporation is undervalued. The fact that the price was unchanged is not consistent with the efficient markets hypothesis

perfectly fits the answer

4 0
3 years ago
When a government transfers the rights and obligations of an asset to another legally separate governmental or private sector en
Mamont248 [21]

Answer: A service concession arrangement (D)

Explanation:

A service concession arrangement is an agreement whereby the government contracts with a private enterprise in order to operate, develop and maintain an infrastructural facility such as a tunnel, bridge, road, hospital, airport or prison. The government regulates and controls the kind of services the operator must provide, to whom the services are provided and at the price the services will be provided.

Concession agreements can also be between a non-governmental owner and a concessionaire, whereby the non-governmental owner gives the operator the exclusive rights to use and maintain the business for a stipulated period of time under specified conditions.

4 0
3 years ago
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