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Y_Kistochka [10]
3 years ago
13

Suppose the market follows a single index model, where the index has standard deviation of 15%. For a stock with firm-specific r

isk (in terms of STD) of 10% and standard deviation of 30%, what is the beta of the stock
Business
1 answer:
iogann1982 [59]3 years ago
3 0

Answer:

Explanation:

St deviation of stock σ = √( β² x σ₁² + σ₂² )

σ₁ = standard deviation of market = .15 and σ₂ is standard deviation of firm

Putting the values given

.30 = √ ( β² x .15² + .10² )

.09 =  β² x .0225 + .01

β² x .0225 = .08

β² = 3.5555

β = 1.88

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Cache Creek Manufacturing Company is expected to pay a dividend of $4.20 in the upcoming year. Dividends are expected to grow at
Digiron [165]

Answer: 0.9

Explanation:

The Expected Return on an investment can be calculated using the Dividend Discount Model as it is a key component in thw formula which is,

P = D1 / r - g

where,

D1 is the dividend paid next year

P is the current stock price

g is the growth rate

r is the expected return

With the given figures we have,

84 = 4.20 / r - 0.08

84 ( r - 0.08) = 4.20

r - 0.08 = 4.20/84

r = 4.20/84 + 0.08

r = 0.13

The Expected Return can be slotted into the CAPM formula to find the beta.

The CAPM formula calculates the Expected Return in the following manner,

Er = Rf + b( Rm - rF)

Where,

Er is expected return

Rf is the risk free rate

Rm is the market return

b is beta

Slotting in the figures gives,

0.13 = 0.04 + b( 0.14 - 0.04)

0.13 = 0.04 + b (0.1)

0.13 - 0.04 = 0.1b

b = 0.09/0.1

b = 0.9

Using the constant-growth DDM and the CAPM, the beta of the stock is 0.9

8 0
3 years ago
Suppose Mary is in consumer equilibrium. The marginal utility of good A is 30, and the price of good A is $2.. . a. if the price
zimovet [89]
 Using formula: Marginal Utility=Change in Total Utility/Change in Quantity
<span>So, the marginal utility of each good will be 30/$2, or 15/$1.
Multiply this marginal utility by the price of each good/service to obtain the marginal utility per unit of good.</span>
<span>Since marginal utility of good A is given then by using this formula the the marginal utility of good B is 60 , MU of good C is 45 and MU of good D is 15</span>

7 0
3 years ago
Describe <br> four factors that determine wage differentials?
Snowcat [4.5K]

<span>The four factors that determine wage differentials include efficiency in labor, where skilled workers may get higher pay than the unskilled ones; working conditions is another factor, as performing one’s job in dangerous areas may give higher pay to compensate for the risks involved; discrimination also affects the wage rates and said rates may be biased against a certain person or group; lastly, there is the demand for laborers across occupations that vary, and the wage paid may depend on the desirability or the requirements needed for a certain job.</span>

3 0
3 years ago
Marketing segmentation is the combining of several groups to create a larger target market for a company’s goods and services.
Allushta [10]

Answer:

false

Explanation:

Market segmentation entails dividing target customers into smaller groupings based on their common shared traits. Segmentation places customers into small manageable groups with similar characteristics such as age, gender, interest, occupation, and geographical location. Customers in the same segment are highly likely to respond uniformly to marketing strategies.

Segmentation enables a business to carry out details research concerning each group. It then offers specific products based on the needs of each target segment.

6 0
3 years ago
Recall our example of an investment of $100,000 in research that yields a pioneering invention that has no commercial value, and
maria [59]

Answer:

Firm A is uniquely situated to the pioneering research and firm B is uniquely situated to application development. There are significant differences arising from broad patent law and narrow patent law. Firm A conducting pioneering research and Firm B conducting development application in this situation the incentive problem is solved when transaction cost is zero. When the transaction cost is zero the breadth of the patent will not matter to the economic efficiency So long as the can bargain with each other. The bargain between inventors is cost-less and makes efficient contracts.

When the transaction cost obstructs the bargaining between the suppliers of pioneering research of and development of application problem arises. The solutions to the problem are lubricating bargaining and allocate rights to the firm who values the most.

Patent protection for the pioneering inventions should be broader for the little standalone value. In contrast patent protection for pioneering invention should be narrower for large standalone value.

Hence the above difference lies in investment from broader patent law and that of the narrower patent law.

4 0
3 years ago
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