Answer: Get a loan derectly
Explanation: Because 2x3=5
Answer:
1. The riskier stock is the one with the higher beta which is Handy Ltd.
Use CAPM to calculate the required return on both stocks. The formula is:
Required return = Risk free rate + beta * (market return - risk free rate)
Gans Ltd Stock Handy Ltd Stock
= 4% + 0.9 * ( 10% - 4%) = 4% + 1.8 * (10% - 4%)
= 9.4% = 14.8%
Difference = 14.8 - 9.4
= 5.4%
2. a. Expected return
Expected return is a weighted average of the returns given the probability of the different state of economies.
= (0.25 * 18%) + (0.4 * 5%) + (0.35 * -2%)
= 0.045 + 0.02 - 0.007
= 5.8%
b. Required return
Using CAPM like in question 1:
Required return = Risk free rate + beta * (market return - risk free rate)
= 4% + 1.2 * ( 10% - 4%)
= 11.2%
c. The asset <u>should not be purchased</u> because its expected return is lower than its required return. This means that the stock is not providing enough return for the risk incurred.
Answer: 10%
Explanation:
Short sale of 600 shares at $25 will yield:
= 600 * 25
= $15,000
You posted 40% of this:
= 40% * 15,000
= $6,000
The profit in a year seeing as the price fell is:
= (25 - 24) * 600 shares
= $600
Rate of return is:
= Profit / Margin posted
= 600 / 6,000 * 100%
= 10%
Entrepreneurship is the answer , hope this helps ! :)
The questions to be answered before making a purchase are
the following;
<span>·
</span>What problems are most likely to happen? – an individual
should think of the problems that may arise based on his or her decisions
<span>·
</span>What could go wrong? – the individual should not
only be concerned with the purchase but what might happen after
<span>·
</span>What problems could be most damaging? – choices are
made available and to think about in order to think whether your choices could
cause problems or harm
