All categories

3 years ago

The risk premium for common stocks

Business

1 answer:

Brrunno [24]3 years ago

7 0

Answer:

Explanation:

Risk premium is the compensation given to investors for holding risky assets. The more risky an asset is, the higher the premium.

A rational investor would be unwilling to invest in a stock that offers zero premium because there is no compensation for the risk that is borne by the investor.

Risk premium is always positive.

Risk premium = expected rate of return of the asset - expected rate of return of the risk free asset.

The more risky the asset, the higher the expected rate of return. So, the expected rate of return of the asset would always be higher than the risk free rate. This makes risk premium positive

You might be interested in

Compared to a purely competitive firm in long run equilibrium, the monpolistic competitor has a?

Airida [17]

Compared to a purely competitive firm in long-run equilibrium, the monopolistic competitor has a higher price and lower output.

<h3>When a monopolistic competitive firm is in long-run equilibrium?</h3>

Long Run Monopolistic Competition Equilibrium: Over the long run, a company in a market with the monopolistic competition will produce several items at the point where the long-run marginal cost (LRMC) curve crosses the marginal revenue curve (MR). Where the quantity produced lies on the average revenue (AR) curve will determine the pricing.

<h3>What ultimately transpires to a monopolistic rival?</h3>

Long-term economic gains or losses in monopolistic competition will be removed by entry or leave, leaving firms with no economic gains. There will be some excess capacity in a monopolistically competitive business; this could be seen as the price paid for the variety of products that this market structure brings about.

Learn more about monopolistic competition: brainly.com/question/28189773

#SPJ4

3 0

2 years ago

How do u know charmed life caitlin's lucky charm is fiction?

Diano4ka-milaya [45]

I don't know that book, but you know something is fiction when it's something that simply can not happen in real life, also if it's based on a character, like Sammy took a bath when he finished playing soccer, unlike dolphins are mammals, which is nonfiction. Hope this helps! Please rate brainiest answer!

7 0

3 years ago

Robert is a single taxpayer who has AGI of $145,000 in 2019; his taxable income is $122,000. What is his federal tax liability f

PolarNik [594]

Answer:

His tax liability for 2019 (due April 2020) is $23,359.50

Explanation:

Since Robert s a single filer, he falls under the fourth tax bracket: income between $84,201 to $160,725. His marginal tax rate is 24%, and his total taxes due are as following:

<u>tax rate</u> <u>earnings</u> <u>taxes due</u>

10% $0 – $9,875 $987,50

12% $9,875 – $40,125 $3,630

22% $40,126 – $85,525 $9,988

24% $85,526 – $122,000 $8,754

total $23,359.50

*Option C is the closest one, but it used the 2018 tax brackets, not the 2019.

7 0

3 years ago

The cost performance index (CPI): a. can be used to estimate the projected cost of completing the project. b. indicates that the

Evgen [1.6K]

Answer:

The correct answer is letter "A": can be used to estimate the projected cost of completing the project.

Explanation:

The Cost Performance Index or CPI measures the projected cost of work completed compared to the current cost spent. The CPI represents a ratio of earned value to actual cost. If the CPI is greater than one, the project is under budget. When the CPI equals one the planned and actual costs are equal. If the CPI is higher than one, the project is over budget.

3 0

3 years ago

Beckingham Sports is an American sporting goods company. Based on $400,000 spent on market research and $600,000 spent on consul

Cerrena [4.2K]

Answer:

The correct answer is E)

Explanation:

Capital budgeting is an accounting method that corporations use to decide which planned acquisitions of fixed assets will be approved and which should be refused.

Some examples of Capital Expenditures include:

Construction of an additional building
Procurement of delivery vehicles
Procurement of new equipment
Rehabilitation of existing equipment

If one of the criteria for classification under Capital Expenditure is that it must be in the plan, then none of the above items mentioned in the question will fly.

Monies have already been expended on the options A, B, and C.

Option D is an offer to purchase an existing asset, not a planned investment. Therefore it also does not qualify.

Hence the correct answer is E.

Cheers!

3 0

3 years ago