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qwelly [4]
3 years ago
12

You recently purchased a stock that is expected to earn 12.6 percent in a booming economy, 8.9 percent in a normal economy and l

ose 5.2 percent in a recessionary economy. Each economic state is equally likely to occur. What is your expected rate of return on this stock?
Business
1 answer:
Arisa [49]3 years ago
7 0

Answer:

r(e) = 0.05433 or 5.433% rounded off to 5.43%

Explanation:

To calculate the expected rate of return of a stock, we take the rate of return under each scenario and multiply it with the probability of that scenario and sum up the answers for each scenario. The formula for expected rate of return can be written as follows,

r(e) = pA * rA  + pB * rB  +  ...  +  pN * rN

Where,

  • p represents the probability of each scenario
  • r represents the return under each scenario

As we have 3 scenarios with equal probability for each scenario, we can say the probability of each scenario is 1/3.

r(e) =  1/3 * 0.126  +  1/3 * 0.089  +  1/3 * -0.052

r(e) = 0.05433 or 5.433% rounded off to 5.43%

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Suppose that the BMW plant in Spartanburg, South Carolina, USA, produces $10 million worth of vehicles in a given year. Of this
ELEN [110]

Answer:

The answer is B. contributes to U.S. GDP, but not U.S. GNP

Explanation:

Gross Domestic Product (GDP) is the market value of all final goods and services produced within the economy of a country within a period of time.

Gross National Product(GNP) is the market value of all final goods and services produced by a citizen of a country irrespective of whether they are in the country or outside the country within a period of time.

The BMW plant in Spartanburg which produces $10million worth of vehicles is in USA but the company in owned by Germans. Since it is produced within the economy of USA, it will count for USA's GDP but it won't count for USA's GNP because it is not owned by USA citizen rather, it will count for Germany's GNP because it is owned by Germans.

3 0
3 years ago
How do investment bankers generate revenues for their firms?
Lesechka [4]
The answer is C they but at a discount, the entire issues of new security....
3 0
3 years ago
Read 2 more answers
The difficulty in cost-benefit analysis is that the benefits are usually evident and easily measurable, while the costs are not
suter [353]

Answer:

B) False

Explanation:

Under the cost benefit analysis a statement is prepared in order to compute the financial aspects of the transaction.

This clearly provides for the estimate to be made towards all the transactions.

But there is a problem in such analysis that exact estimate or even nearby estimate in terms of amount is not feasible to be computed of benefits and cost as well.

And significantly all the benefits can not be traced monetarily.

5 0
3 years ago
Assume that IBM leased equipment that was carried at a cost of $120,000 to Swander Company. The term of the lease is 6 years beg
expeople1 [14]

Answer:

Date           Account titles and Explanation     Debit          Credit

Dec 31, 19   Lease receivables                        $150,001

                   Cost of goods sold                       $120,000

                            Sales                                                           $150,001

                             Equipment                                                 $120,000

                    (To record the lease)

Dec 31, 19   Cash                                                $30,044

                              Lease receivables                                     $30,044

                   (To record the receipt of lease installment)

3 0
3 years ago
Lego, Inc., issued common stock in Year 1. It issued 10,000 shares of 8%, $100 par value cumulative preferred stock for $110 per
Arisa [49]

Answer: $160,000

Explanation:

Given the following:

Par value = $100

Rate of Dividend = 8% = 0.08

Number of shares = 10,000

Preferred Dividend is calculated thus:

Par value * rate of Dividend × number of preferred stock

$100 × 0.08 × 10,000 = $80,000

Since year 4 Dividend wasn't paid

Total year 5 Dividend equals:

(Year 4 Dividend + year 5 dividend)

$(80,000 + 80,000) = $160,000

5 0
3 years ago
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