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Musya8 [376]
3 years ago
8

The market price of a security is $46. Its expected rate of return is 10%. The risk-free rate is 4%, and the market risk premium

is 9%. What will the market price of the security be if its beta doubles (and all other variables remain unchanged)
Business
1 answer:
Alexxx [7]3 years ago
7 0

Answer:

The new Market price =$28.75

Explanation:

According to the  Capital Asset Pricing Model CAPM, we have that  

Expected return= risk free rate+(beta X market risk premium)

10=4+ beta x 9

= 10- 4  = beta x 9

beta =6 /9 =0.666

IF  beta doubles with other variables constant

Expected return= risk free rate+(betaXmarket risk premium)

Beta= 0.666 x2 =1.3333

Expected return = 4+ 1.333 x 9

Expected return 4+ 12=16%

Price  =  Perpertual Dividend /Expected return

where Current Share price =$46

Dividend = $46 x 10%=4.6  

 

The new Market price =  Perpetual dividend/New Required return

= 4.6/16% =$28.75

So the new Market price =$28.75

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Two independent companies, Denver and Bristol, each own a warehouse, and they agree to an exchange in which no cash changes hand
Schach [20]

Answer and Explanation:

The journal entries are shown below

1.

On Denver books

Equipment Dr $17,000

Accumulated depreciation $60,000

Loss on sale of equipment $3,000

                  To Equipment $80,000

(Being equipment recorded)

On Bristol books

Equipment Dr $17,000

Accumulated depreciation $25,000

          To Gain on sale of equipment $10,500

          To Equipment $31,500

(Being equipment recorded)

2.

On Denver books

Equipment Dr $20,000

Accumulated depreciation $60,000

                  To Equipment $80,000

(Being equipment recorded)

On Bristol books

Equipment Dr $6,500

Accumulated depreciation $25,000

          To Equipment $31,500

(Being equipment recorded)

7 0
3 years ago
Suppose the current unemployment rate is 5%, the labor force is 400 million people, the labor force participation rate is 80% an
Reika [66]

Answer:

20,000,000= unemployed people

Explanation:

Giving the following information:

Suppose the current unemployment rate is 5%, the labor force is 400 million people, the labor force participation rate is 80% and the working-age population is 500 million people.

The unemployment rate is the number of people of working age, disposed to work and looking for a job.

Labor force rate= unemployed people/ labor force

0.05= unemployed people/ 400,000,000

400,000,000*0.05= unemployed people

20,000,000= unemployed people

7 0
4 years ago
A perpetuity will pay $300 per year, starting five years after the perpetuity is purchased. is purchased. What is the present va
Maru [420]

Answer:

present value of perpetuity = $29615.93

Explanation:

given data

pay = $300 per year

interest rate = 3%

solution

we get here present value payment after 5 year is

present value = \frac{future\ value}{1+ discount\ rate } ...........1

present value = \frac{1000}{(1+0.03)^5}

present value = $862.60

and

now we get present value on purchase date

present value = \frac{payment}{interest\ rate}   ......2

present value = \frac{862.60}{0.03}

present value = $28753.33

and

present value of perpetuity is

present value of perpetuity =  $862.60 + $28753.33

present value of perpetuity = $29615.93

5 0
3 years ago
Specialists in which field assess and mitigate workplace hazards, such as issuing ear protection to workers in factories with hi
ira [324]

Answer: Industrial Hygiene

Explanation: Specialists in industrial hygiene are also known as occupational hygienists. They serve to analyze, identify, research and measure key elements to industrial hygiene which are biological, chemical, physical and ergonomic (including workplace hazards or stresses) that can cause sickness, impair health, or cause significant discomfort in workers. To do this, they help in spotting these conditions and assist in eliminating or controlling them using appropriate measures.

8 0
4 years ago
Wholesome Cuisine, a frozen foods company, decides to create a new mail order meal division, focused on offering delicious food
emmasim [6.3K]

Answer:

Idea development

Explanation:

At the idea development stage, the company just decides to appraise and investigate whether the innovative idea is feasible and that will it generate value for the company in the long term. Furthermore, the idea is just a theoretical information that just sounds good for the business future and there is further investigation pending to appraise it.

3 0
4 years ago
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