Answer:
Portfolio Return = 11.975%
Explanation:
The portfolio return is calculated by taking the weights of individual securities in a portfolio and multiplying them by the return of individual securities. The formula can be written as,
Portfolio return = wA * rA + wB * rB
Where,
- wA is the weight of security A
- rA is the return on security A
- wB is the weight of security B
- rB is the return on security B
The risk free asset has a beta of zero.
Let the weight of risk free asset be x. The weight of risky asset is 1-x.
Portfolio beta = 0.975 = x * 0 + (1-x) * 1.3
0.975 = 1.3 - 1.3x
0.975 - 1.3 = -1.3x
-0.325 / -1.3 = x
x = 0.25
Portfolio return = 0.25 * 0.032 + (1-0.25) * 0.149 = 0.11975 or 11.975%
Answer:
31 December 2019
Cash 19000 Dr
Accumulated depreciation 12186 Dr
Equipment 27419 Cr
Gain on disposal 3767 Cr
Explanation:
Straight line depreciation method charges a constant depreciation expense through out the useful life of the asset.
To calculate the gain or loss on disposal/sale of an asset like this, we need to first determine the book value or carrying value of asset on that day.
Carrying value = Cost - Accumulated depreciation
Carrying value = 27419 - 12186
Carrying value = $15233
Gain or (loss) on disposal = Cash/Sale proceeds - Carrying Value
Gain or (loss) on disposal = 19000 - 15233
Gain or (loss) on disposal = $3767 Gain
Answer: Micheal will earn an interest of $600 in the first year based on nominal interest rates.
Since we need to compute the interest paid out at the end of year 1, we use the following formula in order to find the interest
where
SI = Simple interest
P = Principal or initial amount invested
N = Number of years
R = Nominal interest rate
Nominal interest rate refers to the rate quoted on the CD or the rate agreed upon. In this question, the nominal interest rate is 3%.
Substituting the values in the formula above we get,
Answer:
Paraguas should borrow at LIBOR + 2.000% and swap for fixed rate debt.
Lluvia should choose funding in floating rate
Explanation:
Paraguas wants the security of fixed rate borrowing; thus it should borrow at LIBOR + 2.000% and swap for fixed rate debt, in which Libor is 5.500%; their total cost at 7.5% is still lower than Fixed rate 12.0%
Lluvia prefer the flexibility of floating rate borrowing, and its rating is better; then it can enjoy lower cost of borrowing at 5%. However it may face the increase if LIBOR increase later; vice versa if LIBOR decrease, its cost of borrowing is able to reduce also.
Answer:
(a)
1. Kalispell State Bank
2. Glacier Boutique
3. Big Sky Sports
4. Kalispell State Bank
5. Big Sky Sports
6. Big Sky Sports
7. None of the above
8. Glacier Boutique
9. None of the above
10. Big Sky Sports
(b) Business transactions refers to the transactions that are related to only business, such as purchase of land, machinery, goods for business purposes. Any type of personal transaction is not included in business transaction.
