Answer:
The CPI for the given year is 123.
Explanation:
Consumer price index (CPI)
In the base year, the typical family bought 4 loaves of bread at $2 per loaf and 2 bottles of wine for $ 9 per bottle.
Cost at base year =$[(4×2)+(2×9)]
=$26
In a given year, bread cost $3 per loaf and wine cost $10 per bottle.
Cost at given year =$[(4×3)+(2×10)]
=$32
The CPI for the given year is
≈123
Answer:
12.6%
Explanation:
Using the Capital Market Pricing Model (CAPM) to compute the expected rate of return on Dee's Fashion stock.
Expected rate of return =
Where R(f) = risk free rate of return, or market return less risk premium = 12.6% - 8.7% = 3.9%
= the risk of the stock relative to the market risk. In this case, beta = 1, since the company is equally as risky as the market (as noted in the question)
R(m) = return of the stock market = 12.6%
Therefore, the expected rate of return on the stock
= 3.9% + 1 * (12.6% - 3.9%)
= 3.9% + 8.7%
= 12.6%.
The return is the same as the stock market return because the stock is equally as risky as the market.