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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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If a price ceiling is set above the equilibrium price in a market rev:a. rationing will be necessary. b. surpluses of the commod
olga_2 [115]

Answer:

b. surpluses of the commodity will develop

Explanation:

A price ceiling is when the government or an agency of the government sets the maximum price for a good or service.

If price ceiling is set above equilibrium price, suppliers would increase supply while consumers would reduce demand. This would lead to an excess supply and surplus in the economy.

When price ceiling is set above equilibrium price, it is known as a non binding price ceiling.

I hope my answer helps you

4 0
3 years ago
Sayid is the sole shareholder of an S corporation in Hattiesburg, Mississippi. At a time when his stock basis is $20,000, the co
stiks02 [169]

Answer:

$20,000

Explanation:

The computation of the taxable gain is shown below:

The corporate gain is

= $40,000 - $20,000

= $20,000

Now the stock basis is increased i.e.

= $20,000 + $20,000

= $40.000

Now the stock basis decreased to zero i.e.

= $40,000 - $40,000

= $0

So, here the taxable gain is of $20,000

4 0
2 years ago
The first economist was:​
Roman55 [17]

Adam Smith was the first

8 0
3 years ago
Consider the following financial statement information for the Sourstone Corporation:
DENIUS [597]

Answer:

A. 56.32 days

B. 40.38 days

Explanation:

The Operating cycle is the Inventory period + AR period

Inventory period= 365/(Cost of goods sold/Average inventory)

Average inventory= (Beginning Inventory + Ending Inventory)/2

Accounts Receivable period= 365/(Credit Sales/Average Accounts Receivable )

Average Accounts Receivable= (Beginning Accounts Receivable + Ending Inventory Accounts Receivable)/2

Calculated Inventory period= 42.58 days

Calculated Accounts Receivable period= 13.74 days

The Cash cycle is also called the Net Operating cycle which is the Inventory period + Accounts Receivable period- Accounts Payable period

Accounts Payable period= 365/(Cost of goods sold/Average Accounts Payable)

Average Accounts Payable = (Beginning Accounts Payables + Ending Inventory Accounts Payable)/2

Calculated Accounts Payable period= 15.94 days

5 0
2 years ago
Mayfair Co. allows select customers to make purchases on credit. Its other customers can use either of two credit cards: Zisa or
alexandr402 [8]

Answer:

June 4 Sold $650 of merchandise (that had cost $400) on credit to Natara Morris.

June 4

Dr Accounts receivable 650

    Cr Sales revenue 650

June 4

Dr Cost of goods sold 400

    Cr Inventory 400

5 Sold $6,900 of merchandise (that had cost $4,200) to customers who used their Zisa cards.

June 5

Dr Accounts receivable 6,693

Dr Credit card fees 207

    Cr Sales revenue 6,900

June 5

Dr Cost of goods sold 4,200

    Cr Inventory 4,200

June 5, after Zisa transfers the money

Dr Cash 6,693

    Cr Accounts receivable 6,693

6 Sold $5,850 of merchandise (that had cost $3,800) to customers who used their Access cards.

June 6

Dr Unbilled revenue 5,733

Dr Credit card fees 117

    Cr Sales revenue 5,850

June 6

Dr Cost of goods sold 3,800

    Cr Inventory 3,800

8 Sold $4,350 of merchandise (that had cost $2,900) to customers who used their Access cards.

June 8

Dr Unbilled revenue 4,263

Dr Credit card fees 187

    Cr Sales revenue 4,350

June 8

Dr Cost of goods sold 2,900

    Cr Inventory 2,900

10 Submitted Access card receipts accumulated since June 6 to the credit card company for payment.

June 10

Dr Accounts receivable 9,996

    Cr Unbilled revenue 9,996

13 Wrote off the account of Abigail McKee against the Allowance for Doubtful Accounts. The $429 balance in McKee’s account stemmed from a credit sale in October of last year.

June 13

Dr Bad debt expense 429

    Cr Allowance for doubtful accounts 429

17 Received the amount due from Access.

June 17

Dr Cash 9,996

    Cr Accounts receivable 9,996

18 Received Morris’s check in full payment for the purchase of June 4.

June 18

Dr Cash 650

    Cr Accounts payable 650

3 0
3 years ago
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