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Umnica [9.8K]
3 years ago
10

Suppose that two factors have been identified for the U.S. economy: the growth rate of industrial production, IP, and the inflat

ion rate, IR. IP is expected to be 4%, and IR 3.0%. A stock with a beta of 1.1 on IP and 0.5 on IR currently is expected to provide a rate of return of 7%. If industrial production actually grows by 7%, while the inflation rate turns out to be 5.0%, what is your revised estimate of the expected rate of return on the stock
Business
1 answer:
Delicious77 [7]3 years ago
6 0

Answer:

11.3%

Explanation:

Given that,

Growth rate of industrial production, IP = 4%

Inflation rate, IR = 3.0%

Beta = 1.1 on IP

Beta = 0.5 on IR

Rate of return = 7%

Before the changes in industrial production and inflation rate:

Rate of return = α + (Beta on IP) + (Beta on IR)

7% = α + (1.1 × 4%) + (0.5 × 3%)

7% = α + 4.4% + 1.5%

7% - 4.4% - 1.5% = α

1.1% = α

With the changes:

Rate of return:

= α + (Beta on IP) + (Beta on IR)

= 1.1% + (1.1 × 7%) + (0.5 × 5%)

= 1.1% + 7.7% + 2.5%

= 11.3%

Therefore, the revised estimate of the expected rate of return on the stock is 11.3%.

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A ________ transaction in the interbank market is the simultaneous purchase and sale of a given amount of foreign exchange for t
miskamm [114]

Answer:

Explanation:

A swap transaction in the inter bank market is the simultaneous purchase and sale of a given amount of foreign exchange for two different value dates. The purchase and sale are with the same counterpart. A swap may be considered a technique for borrowing another currency on a fully collateralize basis.

3 0
3 years ago
What are the 4 factors that affect the international business environment? Give two examples/characteristics of each.
iren [92.7K]

Answer:

Geography, cultural and social factors, economic conditions, and political and legal factors are the four parts of the international business environment.

Explanation:

5 0
2 years ago
A company had a standard sales price of $1.79 per unit and expected to sell 10,000 units. Due to a downturn in the economy, the
Sloan [31]

Answer:

Sales price variance = $1,900.

Explanation:

We know,

Sales price variance = (Standard sales price - Actual sales price) × Actual sales quantity

Given,

Standard sales price = $1.79 per unit.

Actual sales price = $1.59 per unit.

Actual sales quantity = 9,500 units.

Putting the values into the formula, we can get

Sales price variance = (Standard sales price - Actual sales price) × Actual sales quantity

or, Sales price variance = ($1.79 -  $1.59) × 9,500

or, Sales price variance = $0.2 × 9,500

or, Sales price variance = $1,900.

4 0
3 years ago
ABC had a net income of $8,000, $5,000, $12,000, and $10,000 over the first four years of the company's existence. If the averag
Nezavi [6.7K]

Answer:

B) $23,000.

Explanation:

ABC's accumulated net income (or retained earnings) over the past four years = $8,000 + $5,000 + $12,000 + $10,000 = $35,000

ABC's accumulated dividends paid over the past four years = $3,000 x 4 = $12,000

Since dividends are paid using money that proceeds from retained earnings, the balance of the retained earnings account = accumulated retained earnings - accumulated dividends = $35,000 - $12,000 = $23,000

4 0
3 years ago
Stein Co. issued 17-year bonds two years ago at a coupon rate of 9.1 percent. The bonds make semiannual payments. If these bonds
Marizza181 [45]

Answer:

YTM is 7.43%

Explanation:

The yield to maturity of a bond can be computed using the rate formula in excel,which is given below:

=rate(nper,pmt,-pv,fv)

the nper is the number of coupon interest the bond would pay before it is redeemed at maturity starting from ,which is 15 years multiplied by 2=30

the pmt is the semiannual coupon payable by the bond,which is $1000*9.1%/2=$45.5

the pv is the price of the bond which is 115%*$1000=$1150

the fv is the face value of the bond at $1000

=rate(30,45.5,-1150,1000)=3.715%

The rate of 3.715% is a semi annual rate

annual rate 7.43%(3.715%*2)

6 0
3 years ago
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