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Stels [109]
3 years ago
7

Sure Tool Company is expected to pay a dividend of $2 in the upcoming year. The risk-free rate of return is 4%, and the expected

return on the market portfolio is 14%. Analysts expect the price of Sure Tool Company shares to be $22 a year from now. The beta of Sure Tool Company's stock is 1.25. The market's required rate of return on Sure's stock is Group of answer choices 17.5%. None of the options are correct. 16.5%. 14.0%. 15.25%.
Business
1 answer:
alexira [117]3 years ago
3 0

Answer:

The market's required rate of return on Sure's stock is 16.5%

Explanation:

The required rate of return is the minimum return that investors would accept to invest in a stock based on the risk associated to that stock. The required rate of return can be calculated using the Capital Asset Pricing Model (CAPM). The formula for required rate of return under this model is,

Required rate of return (r) =  rFR + Beta * (rM - rFR)

Where,

  • rFR is the risk free rate
  • Beta is the stock's measure of risk
  • rM is the expected return on market

Thus, for Sure Tool, the required rate of return is,

r = 0.04 + 1.25 * (0.14 - 0.04)

r = 0.165 or 16.5%

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Answer: Opening a regular savings account.

Explanation: This is because she will save more.

5 0
3 years ago
The needs of users of government financial reports are the same as those of users of business entity financial reports.
olga55 [171]

Answer:

FALSE

Explanation:

The needs of users of government financial reports are NOT the same as those of users of business entity financial reports.

Users who are interested in government financial reports which has to do with understanding the financial performance of federal, state and local governments ; do so, to understand if the purpose of governance is being achieved which is the well-being of the citizens (Economy and Defense).  

Contrariwise, users of business entity financial reports, which has to do with understanding the financial performance of business organisations, do so, to understand if the purpose of business establishment is being achieved which is the profit-maximization.

5 0
3 years ago
after you've finished building your portfolio and adding securities to it in prtu, what is your next logical stop?
HACTEHA [7]

A fixed income index is the natural next step after adding securities to it in prtu.

<h3>What does the phrase "create a portfolio" mean?</h3>

Understanding how various asset classes, funds, and weightings affect one another, their performance and risk, and how choices relate to an investor's goals is the process of portfolio design.

<h3>What should the format of a creative portfolio be?</h3>

A creative portfolio should contain more than just examples of your best work. Instead, you should consider your portfolio as a visually appealing, perfectly coherent piece of "creative work" in and of itself, one that has been "well thought out and marketed like a product" (Cleaver).

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7 0
2 years ago
The risk-free rate of return is 3% and the expected return on the market portfolio is 14%. Oklahoma Oilco has a beta of 2.0 and
Monica [59]

Answer:

25%

Explanation:

Data provided

Risk free return = 3%

Beta = 2

Expected return on the market portfolio = 14%

Risk-free rate of return = 3%

The computation of cost of retained earnings is shown below:-

Cost of retained earnings = Risk free return + Beta × Risk premium

=  3% + 2 × (14% - 3%)

=  3% + 2 × 11%

=  3% + 0.22

= 25%

Therefore, for computing the cost of retained earning we simply applied the above formula.

8 0
3 years ago
Suppose investment spending increases by $50 billion and as a result the equilibrium income increases by $200 billion. the value
iren [92.7K]
<span>The marginal propensity to consume (MPC) is the the change in consumption divided by change in income. Where change in in consumption = $50B and change in income = $200B. So we have 50/200 =1/4 = 0.25. So the MPC is $250M</span>
8 0
3 years ago
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