1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
oee [108]
2 years ago
15

You are analyzing a stock that has a beta of 1.20. The​ risk-free rate is 5.0 % and you estimate the market risk premium to be 6

.0 %. If you expect the stock to have a return of 11.0 % over the next​ year, should you buy​ it? Why or why​ not?
Business
1 answer:
Charra [1.4K]2 years ago
5 0

Answer:

No, you should not buy the it, Rate of 11% does not fully compensate your risk associated with the Beta 1.2. On this beta you should expect 12.2% return. Any other stock with lower risk might be acceptable for 11% return.

Explanation:

Capital asset pricing model measure the expected return on an asset or investment. it is used to make decision for addition of specific investment in a well diversified portfolio.

Formula for CAPM

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

Expected return = 5% + 1.2 ( 6% )

Expected return = 5% + 7.2%

Expected return = 12.2%

You might be interested in
The Sisyphean Company is planning on investing in a new project. This will involve the purchase of some new machinery costing $4
saul85 [17]

Answer:

21%

Explanation:

Internal rate of return is the discount rate that equates the after-tax cash flows from an investment to the amount invested

IRR can be calculated with a financial calculator  

Cash flow in year 0 = $-400,000.

Cash flow in year 1 - 4 = $157,452.975

IRR = 21%

To find the IRR using a financial calculator:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. After inputting all the cash flows, press the IRR button and then press the compute button.  

4 0
2 years ago
Two months ago, Air-tite Corporation purchased 5,500 pounds of Hydrol, paying $18,700. The demand for this product has been very
butalik [34]

Answer:

A, B.  

Explanation:

A is relevant as the 400-pound remaining can be sold at market price after the special order

B is relevant as the whole 5,500 can be sold at market price instead of the special order

C is irrelevant as the cost has already been uncured

D is irrelevant

4 0
3 years ago
The risk-free rate is 2.3 percent and the market expected return is 12 percent. What is the expected return of a stock that has
andrew-mc [135]

Answer:

The expected return = 10.739.

Explanation:

Given risk-free rate of return = 2.3 per cent

Market expected return = 12 percent  

The value of beta = 0.87

Use the below formula to find the expected return.

The expected return = Risk free rate of return + Beta × (Market expected return - risk free rate of return)

The expected return = 2.3 + 0.87 (12 – 2.3)

The expected return = 10.739

7 0
2 years ago
Zipcar: Creating Value in the Marketplace Zipcar: Creating Value in the Marketplace Nearly a decade ago, the founders of Zipcar
natta225 [31]

Complete Question

The complete question is shown on the first , second, third, fourth and fifth uploaded image

Answer:

1a

  The correct option is  C

1b

    The correct option is  D

1c

  The correct option is  C

1d

  The correct option is  C

Explanation:

1a. Zipcar is an example of what type of market...

Answer: value-based marketing

1b. Zipcar's goal is to have an available... Zipcar's goal is to have an available zipcar located within 10-15 minutes of its members. This is an example of what component of the marketing mix?

 Answer:Place

1c  Zipcar traditionally focused on marketing t... Zipcar traditionally focused on marketing toward individuals without cars as a convenient form of alternative transportation. Zipcar has now begun to also focus its marketing toward businesses and organizations to use Zipcar for their employees. This is an example of

  Answer: B2B marketing

1d

  1d. Which of the following statements about Zipcar illust... Which of the following statements about Zipcar illustrates how marketing can help to enrich society  

Answer: One of Zipcar's core mission is to "change the world through urban and environmental transformation"

8 0
3 years ago
A company had a beginning balance in retained earnings of $430,000. It had net income of $60,000 and declared and paid cash divi
ella [17]

Answer:

b. $433,750

Explanation:

The ending balance in retained earnings can be calculated as;

= Beginning balance + Net income - Cash dividends

Given that;

Beginning balance = $430,000

Net income = $60,000

Cash dividends = $56,250

= $430,000 + $60,000 - $56,250

= $433,750

Therefore, the ending balance in retained earnings is $433,750

4 0
2 years ago
Other questions:
  • Thomas was a warehouse specialist at Finkorg, a company that sells consumer durables. When the company was going through a finan
    8·1 answer
  • Jack owns a local trucking company. With fuel costs being expensive, Jack wants to evaluate how much fuel, on average, he should
    7·1 answer
  • On September 23, Reese Company received a $350 check from Mike Moluf for services to be performed in the future. The bookkeeper
    5·1 answer
  • A registered rep is in the process of being hired with a new firm. The registered rep isn't sure whether it is required that he
    5·1 answer
  • The Wood Division of Fir Products, Inc. manufactures rubber moldings and sells them externally for $55. Its variable cost is $25
    8·1 answer
  • In the Keynesian-cross model, fiscal policy has a multiplied effect on income because fiscal policy: changes income, which chang
    14·2 answers
  • The Balance Sheet for Renuvation LLC shows assets totaling $107,000 and liabilities totaling $75,000. Which of the following sta
    14·1 answer
  • 11. Which of these is an example of an element of a research report
    9·1 answer
  • Select the question that can be answered using only raw data. Multiple choice question. Which of the perishable items used by a
    9·1 answer
  • A __________________ often results in an outflow of financial capital leaving the domestic economy and being invested in the glo
    15·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!