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vovikov84 [41]
3 years ago
13

Consider two stocks, A and B. Stock A has an expected return of 10% and a beta of 1.2. Stock B has an expected return of 14% and

a beta of 1.8. The expected market rate of return is 9% and the risk-free rate is 5%. Security __________ would be considered the better buy because
Business
1 answer:
barxatty [35]3 years ago
8 0

Answer:

B; it offers an expected excess return of 1.8%

Explanation:

Here are the options :

A; it offers an expected excess return of .2%A; it offers an expected excess return of 2.2%B; it offers an expected excess return of 1.8%B; it offers an expected return of 2.4%

to determine which stock is the better buy, we have to calculate the expected return of the stocks using CAPM

According to the capital asset price model: Expected rate of return = risk free + beta x (market rate of return - risk free rate of return)

Stock A = 5% + 1.2(9% - 5%) = 9.8%

Stock B = 5% + 1.8(9% - 5%) = 12.20%

The next step is to determine the excess return

stated expected return - calculated expected return = excess return

Stock A's excess return = 10% - 9.8% - 0.2%

Stock B's excess return = 14 - 12.20 = 1.8%

Security B would be considered because it has a higher excess return

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Wagon Department Store had net credit sales of $16,000,000 and cost of goods sold of $15,000,000 for the year. The average inven
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Answer:

7.5 times

Explanation:

Inventory turnover = \frac{Cost \: of\: goods\: sold}{Average\: Inventory}

We have been provided that,

Cost of goods sold = $15,000,000

Average inventory for the year = $2,000,000

Therefore, Inventory Turnover ratio = \frac{15,000,000}{2,000,000}

= 7.5 times

It means on an average how many times the inventory is sold, and replaced during the period.

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3 years ago
Macro photography often involves what type of depth of field?
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8 0
3 years ago
Read 2 more answers
At December 31, 2022, the following information (in thousands) was available for Ayayai Inc.: ending inventory $22,000; beginnin
Anuta_ua [19.1K]

Answer:

Inventory turnover in days = 43.59 days

Inventory turnover (No of times)=  8.37 times

Explanation:

<em>Inventory turnover days is the average length of time it takes a business to sell its inventory before replacement.</em>

Inventory turnover in days

= Average inventory /Cost of goods sold × 365 days

<em>Average inventory = (Opening Inventory + closing inventory)/2</em>

<em>Average inventory </em>

= (21,000 + 22,000)/2

= 21,500

<em>Inventory turnover in days</em>

(21,500/180,600) × 365 days

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4 0
3 years ago
Inside Incorporated was issued a charter on January 15 authorizing the following capital stock: Common stock, $6 par, 100,000 sh
marin [14]

Answer:  

$1,114,000   -  total equity section

Balance sheet extract

common stock   (120,000 units)                   $720,000

common stock share premium                     $240,000

preference shares (8 000 units)                   $80,000

preference share premium                            $36,000

Profit (net income)                                       <u>     $ 38,000</u>

                                                                          $1,114,000      

Explanation:

common stock account (100,000 + 20,000) x $6 par value = $720,000

common stock premium per unit is calculated $18 minus par value of $6 = $12. total premium is 12 x 20,000 units issued= $240,000

Preference shares account = (5000+3000) x $10 = $80,000

preference share premium (22 minus 10) = $12 per unit

total preference shares premium is $12 x 3000 issued units= $36,000

8 0
3 years ago
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