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mestny [16]
3 years ago
9

According to the capital asset pricing model, the expected return on a security is: Group of answer choices positively and linea

rly related to the security's variance. positively and non-linearly related to the security's variance. positively and linearly related to the security's beta. positively and non-linearly related to the security's beta.
Business
1 answer:
Delicious77 [7]3 years ago
5 0

Answer:

e. the expected return on a security is positively and linearly related to the security's beta.

Explanation:

As per CAPM: Expected return (ER) = Rf + \beta (Rm - Rf)

Lets assume risk free return (Rf) as 5%, \beta as 2 and expected market return (Rm) as 10%

then, ER = 5% + 2 (10% - 5%) = 15%

However if lets assume all the other factors remain the same and \beta increases to 3

then, ER = 5% + 3 (10% - 5%) = 20%

Similarly if \beta reduces to 1

then, ER = 5% + 1 (10% - 5%) = 10%

So higher the \beta higher is the risk and hence higher the expected return. Hence expected return on a security is positvely and linearly related to the security's beta

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An investor borrows an amount at an annual effective interest rate of 5% and will repay all interest and principal in a lump sum
Ghella [55]

Answer:

d. 101

Explanation:

first we must determine the amount of the loan:

PV of face value = $1,000 / (1 + 3%)²⁰ = $553.68

PV of coupon payments = $40 x 14.877 (PV annuity factor, 3%, 20 periods) = $595.08

Loan amount = $1,148.76

Future value of the loan = $1,148.76 x (1 + 5%)¹⁰ = $1,871.21

You will receive 20 coupon payments of $40 each, which will be reinvested at 2% semiannual rate. You will also receive $1,000 corresponding to the face value of the bond.

Future value of the coupon payments = $40 x 24.297 (FV annuity factor, 2%, 20 periods)] = $971.88

Total money received at the end of the 10 year period = $971.88 + $1,000 = $1,971.88

Gain = $1,971.88 - $1,871.21 = $100.67 ≈ $101

7 0
2 years ago
What is a well-informed, but often neglected, source of free marketing data? A. infomercials B. college professors C. Secondhand
klemol [59]

The correct answer is option B - COLLEGE PROFESSORS. The Academia is a brilliant source of free marketing data, and they are very knowledgeable and well-informed. However, the academia is often neglected because entrepreneurs usually ignore and/or overlook them

4 0
3 years ago
How many people went or is still going to vo-tech in Bloomsburg pa?<br><br>i need some advice
oksano4ka [1.4K]

Tours will be held on the following evenings, for the school districts listed. Times are 6:00 – 8:00 PM on these nights:

* Danville – February 3rd and 4th

* Central Columbia and Millville – February 10th and 11th

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7 0
2 years ago
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At its current output level, Pretty Flowers Florist has average fixed costs equal to $5.40 and average variable costs equal to $
lapo4ka [179]

Answer:

The correct option is D: $8.60

Explanation:

Average fixed cost of Pretty Flowers = $5.40

Average variable costs of Pretty Flowers = $3.20

We are asked to calculate the Average total cost of Pretty Flowers at this current level

Hence:

Average total cost Pretty Flowers = Average fixed cost of Pretty Flowers + Average variable costs of Pretty Flowers

If we substitute the value of these variables in the equation, we get:

Average total cost Pretty Flowers = $5.40 + $3.20 = $8.60

3 0
3 years ago
Read 2 more answers
Types of Financial Assets Match the description of the security to the type of financial asset. A security that provides a payof
IRISSAK [1]

Answer: Derivative security

Explanation:

Derivative security is referred to as the security that provides a payoff which depends on the values of other assets.

A derivative security is referred to as the financial instrument whereby the value depends on the value of another asset. There are different types of derivatives such as options, swaps, futures, and forwards. Example of derivative security is convertible bond.

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