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Gre4nikov [31]
3 years ago
12

Suppose you observe the following situation: State of Economy Probability of State of Economy Rate of Return if State Occurs Sto

ck A Stock B Boom .21 .189 .097 Normal .74 .158 .076 Recession .05 - .246 .042 Assume the capital asset pricing model holds and Stock A's beta is greater than Stock B's beta by .84. What is the expected market risk premium?
A. 10.06 percent
B. 8.28 percent
C. 7.81 percent
D. 9.05 percent
E. 7.94 percent
Business
1 answer:
klio [65]3 years ago
6 0

Answer:

C. 7.81%

Explanation:

Stock A and Stock B expected Return shall be calculated using the following formula:

Stock A/B expected [email protected]*Return at [email protected]*Return at [email protected]*Return at Recession.

Stock A return=0.21*18.9%+0.74*15.8%+0.05*-24.6%

                       =14.43%

Stock B return=0.21*9.7%+0.74*7.6%+0.05*4.2%

                       =7.87%

Market risk premium=(Stock A Return- Stock B return)/0.84

Market risk premium=(14.43%-7.87%)/0.84=7.81%

So Based on the above explanation, the answer shall be C. 7.81%

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One problem with the consumer price index stems from the fact that, over time, consumers tend to buy larger quantities of goods
BigorU [14]

Answer:

SUBSTITUTION BIAS

Explanation:

Substitution bias occurs when a customer decides to purchase a substitute of a good after the prices becomes cheaper than the goods they normally purchase. It rises as a problem in price index due to the fact that customers/buyers can decide to change or substitute goods at an instant because of changes in prices. In situations like this, customers tend to avoid the whole increase in prices by changing to cheaper substitutes. Substitution generally is a consumer changing or substituting an expensive product for a cheaper one due to changes in prices. This usually leads to inflation rate been overestimated or overstated.

4 0
3 years ago
McCallister's just purchased $16,500 worth of inventory. The terms of the sale were 1/15, net 45. What is the implicit interest?
Greeley [361]

The implicit interest based on the information given is $165.

<h3>How to calculate the interest?</h3>

It should be noted that the implicit interest is calculated as:

= Inventory worth × Discount rate

= $16500 × 1%

= $165

Therefore, the implicit interest based on the information given is $165.

Learn more about interest on:

brainly.com/question/24080432

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3 0
2 years ago
During April, the production department of a process manufacturing system completed a number of units of a product and transferr
malfutka [58]

Answer:

1) completed and transferred 293,000

<u><em>Equivalent units under W/A method:</em></u>

EU materials     338,500

EU conversion  306,000

Explanation:

Beginning WIP                 33,000

started and completed <u>260,000</u>

completed and transferred 293,000

Ending WIP                      65,000

EU under weighted-average methood:

complete and transferred plus percentage of completion ending WIP

293,000 + 65,000 x 70%  =  338,500

293,000 + 65,000 x 20%  =  306,000

3 0
3 years ago
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hichkok12 [17]

Answer:

The correct option is E , laissez-faire

Explanation:

Option A,autocratic is not correct since the scenario painted an opposite scenario and autocratic approach to management means the manager tells the subordinates what to do.

Bureaucratic is when decision making is slow because many stakeholders are expected to jointly decide.

However,laissez-faire is an approach where subordinates are allowed to think out of the box and get tasks accomplished without manager's interference.

8 0
3 years ago
At any given hotel, one of the largest departments is housekeeping.
KengaRu [80]

Answer:

True

Explanation:

3 0
2 years ago
Read 2 more answers
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