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
DanielleElmas [232]
2 years ago
5

Suppose stocks offer an expected rate of returns of 10% with a standard deviation of 20%, and gold offers an expected return of

5% with a standard deviation of 25%. (i) If the correlation between gold and stocks is sufficiently low, gold ______ be held as a component in the optimal portfolio. (ii) If the correlation coefficient between gold and stocks is 1.0, then gold ______ be held as a component in the optimal portfolio.
Business
1 answer:
FinnZ [79.3K]2 years ago
4 0

Answer: A)  (i) will; (ii) will not

Explanation:

The optimal portfolio should be one where the assets are diversified such that returns can be made regardless of the direction the economy is going. For this to happen, asset classes need to have a low correlation with one another.

If the correlation between gold and stocks is low therefore, gold should and will be held as a component in the portfolio. If the correlation between gold and stocks is 1.0 - this means that they are perfectly correlated and move together - gold should not be in the optimal portfolio as it would be too risky.

You might be interested in
Nanjones Company manufactures a line of products distributed nationally through wholesalers. Presented below are planned manufac
Murrr4er [49]

Answer:

Variable manufacturing overhead spending variance= $2,000 favorable

Explanation:

<u>First, we need to calculate the predetermined overhead rate:</u>

<u></u>

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Predetermined manufacturing overhead rate= 2,400,000 / 240,000

Predetermined manufacturing overhead rate= $10 per machine hour

<u>To calculate the variable overhead spending variance, we need to use the following formula:</u>

<u></u>

Variable manufacturing overhead spending variance= (standard rate - actual rate)* actual quantity

Variable manufacturing overhead spending variance= (15 - 214,000/21,600)*21,600

Variable manufacturing overhead spending variance= $2,000 favorable

6 0
3 years ago
"Stock in Daenerys Industries has a beta of 0.73. The market risk premium is 10 percent, and T-bills are currently yielding 5 pe
ololo11 [35]

Answer:

CAPM = 12.30%

Dividend Growth Model=  10.32%

Explanation:

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

5% + (0.73 x 10%) = 12.30%

according to the constant dividend growth model

price = d1 / (r - g)

d1 = next dividend to be paid

r = cost of equity

g = growth rate

$35 = $1.6 x (1.055) / (r - 0.055)

r = 1.688 / 35 + 0.055 = 0.1032 = 10.32%

8 0
3 years ago
Curtis invests $250,000 in a city of Athens bond that pays 7 percent interest. Alternatively, Curtis could have invested the $25
Anna11 [10]

Answer:

7%

Explanation:

Interest income if Curtis invested

250,000 x 9% = 22,500

After tax interest income = 22,500 - (22,500 x 24%)

= 17,100

After tax rate of return = 17,100/250000

0.068

Approximately 7%

7 0
3 years ago
Read 2 more answers
Why is it important for a human resource manager to carefully maintain<br> employee records?
aleksklad [387]

Answer:

Certain records require employee privacy to be protected. Not maintaining and following best practices for employee record keeping leaves you vulnerable to defending yourself against lawsuits, labor investigations or audits.

Explanation:

8 0
3 years ago
Read 2 more answers
Why do you think it is important to understand the legal and ethical issues in photography?
Readme [11.4K]

It is important to understand the legal and ehtical issues in photography because you are taking photos of families, friends, children and ost of the time, you have no relation to them. Most photographers will develope a contract that outlines what the photographers rights that they have with the photos and likewise for the customer. It is important to understand who's property they are and how the rights to the photos are distriputed so that there is no sueing over misuse of photos.

8 0
3 years ago
Read 2 more answers
Other questions:
  • Payback period The Ball Shoe Company is considering an investment project that requires an initial investment of $ 544,000 and r
    10·1 answer
  • Which type of market consists of many buyers and sellers trading over a range of prices rather than a single market​ price?
    5·1 answer
  • Real gross domestic product _______.a. is a measure of inflation. b. can change from one year to the next even if there is no ch
    13·1 answer
  • Determine the value-added, non-value-added, and total lead times, and the value-added ratio under the present and proposed produ
    6·1 answer
  • On August​ 14, Park Avenue Bank lent​ $210,000 to City Coffee Shop on a 75​ day, 4% note. What is the maturity value of the​ not
    15·1 answer
  • Discuss perspectives in purchasing and purchasing in the future ​
    15·1 answer
  • ______ is a chemical that captures energy for photosynthesis.
    9·1 answer
  • When using the high-low method, if the high or low levels of cost do not match the high or low levels of activity, ______.
    9·1 answer
  • This year you have decided to focus your efforts on marketing to employer group plans. One employer provides you with a list of
    7·1 answer
  • What information must be contained in the dispatch release for a domestic air carrier flight?
    14·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!