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Hitman42 [59]
3 years ago
9

The concept of risk and return is subjective for different people, as well as for corporations.

Business
1 answer:
Juli2301 [7.4K]3 years ago
3 0

Answer:

Risk and Return

1. Joe is an average investor. His financial advisor gave him options of investing in stock A, with a σ of 12%, and stock B, with a σ of 9%. Both stocks have the same expected return of 16%. Joe can pick only one stock and decides to invest in stock B.

Good Financial Decision?

Yes

No

2. Marcie works for an educational technology firm that recently launched its employee stock option plan (ESOP). Marcie allocated all her investments in the ESOP.

Good Financial Decision?

Yes

No

3. rin wants to invest in a hedge fund that has had a very strong performance track record. The hedge fund has given its investors a return of over 60% for the past five years. Although Erin is tempted to put her money in the fund, she decides to conduct due diligence on the hedge fund’s assets, because she is aware that past performance is no guarantee of future results.

Good Financial Decision?

Yes

No

Explanation:

1. Joe's decision to invest in stock B is a good financial decision.  Since both investments have the same returns, the decision on which investment to take shifts to the standard deviation of the returns, which specifies the variability of the returns.  Invariably, the investment with less standard deviation should win the vote.  Therefore, Joe's decision is a good financial decision because investment in B has a standard deviation of 9% unlike A's 12%.

2. Putting all eggs in one market as Marcie had done by allocating all her investments in the ESOP is not a good financial decision, theoretically.  It is always best to spread the risks, though higher-yielding investments (returns) bear higher risks.

3. The decision of Erin to conduct due diligence on the hedge fund's assets, despite its past performance is a good financial decision.  Due diligence reveals some behind-the-scene information that are instrumental in making sound business decisions.  Who are the present managers of the fund?  What systems are in place in the entity to guarantee similar future performance, all things being equal?  What market's sentiments and information are available for consideration?  These questions, and many others can be answered through a due diligence.  Surely, "past performance is no guarantee of future results."

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Given the following demand and supply equations determine the market equilibrium price and quantity. QD=30-3p. As=10-5p. Where Q
pochemuha

Answer:

Equilibrium price, p = 2.5

Equilibrium Quantity, Q = 22.5

Explanation:

The equation is:

Qd = 30 - 3p

Qs = 10 + 5p

At equilibrium, Quantity demanded equals quantity supplied

Equate Qd = Qs to find equilibrium price

30 - 3p = 10 + 5p

30 - 10 = 5p + 3p

20 = 8p

p = 20/8

P = 2.5

Substitute equilibrium price into Qd and Qs equation to find equilibrium Quantity

Qd = 30 - 3p

= 30 - 3(2.5)

= 30 - 7.5

= 22.5

Qs = 10 + 5p

= 10 + 5(2.5)

= 10 + 12.5

= 22.5

Therefore,

Equilibrium price, p = 2.5

Equilibrium Quantity, Q = 22.5

4 0
2 years ago
Suppose a firm has an annual budget of $200,000 in wages and salaries, $75,000 in materials, $30,000 in new equipment, $20,000 i
Schach [20]

Answer:

The firm earns revenues of $360,000 per year. To receive a normal profit, the firm described above would have to earn additional revenue of $90,000

Explanation:

As per the information provided in the question, the current profit/loss after deducting all expenditure from income is as follows:

Particular                                     Amount ($)

Revenue                                      360,000

Less: Wages and Salaries          (200,000)

Less: Materials                             (75,000)

Less: New Equipment                  (30,000)

Less: Rented Property                 (20,000)

Less: Interest Costs                      (35,000)

Profit/Loss                                           0

As confirmed from the calculation above currently no profit is being earned even after the owner/manager not receiving income from the firm. Therefore, the firm should generate additional revenue of $90,000 in order to earn normal profit.

8 0
3 years ago
Which of the following combinations should be avoided? a. high price and high quality b. low price and low quality c. heavy prom
NNADVOKAT [17]

Answer: heavy promotion and low (exclusive) availability

Explanation:

The wrong combination is high promotion and low availability, because when a product is highly promoted it would lead to high interest in that product from the consumers, this would lead to a high demand for that product from customers. And this high demand needs to be met with high supply, which is not the case here, therefore scarcity would set in.

4 0
2 years ago
The terms of trade reflect the:
WITCHER [35]

Answer:

The correct answer is option b.

Explanation:

The terms of trade is the ratio at which two countries exchange their goods. It is the ratio of exports and imports of a country. Terms of trade reflect the health of the economy.  

It measures the number of goods a country can import in exchange for the goods it is exporting.  

An increase in the price of exported goods will increase the terms of trade for a country. While an increase in the price of imported goods will cause it to decline.

4 0
3 years ago
You have just been elected to public office and you have been informed that the government does not have money to pay all of its
slava [35]
<h3>answer:</h3>

not a.

not b.

not c.

it's d.

<h3>explanation:</h3>

Lower tax rates enable firms to invest more – this leads to higher growth and therefore, higher tax revenues

3 0
1 year ago
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