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bulgar [2K]
3 years ago
7

A stock has an expected return of 11.85 percent, its beta is 1.24, and the expected return on the market is 10.2 percent. What m

ust the risk-free rate be? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Business
1 answer:
prisoha [69]3 years ago
3 0

Answer:

The risk free rate is 3.325%

Explanation:

The required rate of return or cost of equity of a stock can be calculated using the CAPM. The CAPM estimates the required rate of return of a stock based on three factors- risk free rate, stock's beta and the market risk premium. The equation of required rate of return under CAPM is,

r = rRF + Beta * (rM - rRF)

Where,

  • rRF is the risk free rate
  • rM is the return on market
  • (rM - rRF) gives us the risk premium of market

We already have the values for r, Beta and rM. Plugging in these values in the formula, we calculate the rRF to be,

Let rRF be x.

0.1185 = x + 1.24 * (0.102 - x)

0.1185 = x + 0.12648 - 1.24x

1.24x - x  =  0.12648 - 0.1185

0.24x = 0.00798

x = 0.00798/0.24

x = 0.03325 or 3.325%

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Answer:

An investment readily convertible to a known amount of cash

Explanation:

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Examples of cash equivalents include commercial papers, bank certificate of deposit, treasury bills usually with a tenor of 3 months or less etc.

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6 0
2 years ago
Find the effective rate of interest to the nearest hundredth percent if $60.94 is earned in one year on a deposit of
Nata [24]

Answer:

6.25%

Explanation:

The formula for calculating interest rate is as follows

I= P x R x T

Where

I= interest,  P= principal amount, T is time

in this case: I= $60.94, P=$975, T=1 year

Therefore:

$60.94 = $975 x( r/100) x 1

$60.94 =975(r/100) multiply both side by 100 to get rid of the fraction.

6094=975r

r = 6094/ 975

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8 0
2 years ago
When preparing her monthly budget, marge kent has a total spending allowance of $4,600. each month she pays $1,200 in rent, $60
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8 0
3 years ago
High-risk or major functions are addressed in the first cycles there by delivering an operational product. Which of the sdlc pro
Lady bird [3.3K]

The SDLC process models achieves the above function is Incremental model. Thus, option (d) is correct.

<h3>What is risk?</h3>

Risk refers to the chance of happening something wrong. It involves the uncertainty about the after effects of the acts. For the businessman, risk is the reward for profit.

Incrementalism Model SDLC is a subset of a bigger system that divides a project into releases and then incrementally adds capability to each build.

This technique prioritizes the demands of the system, which are then achieved in groups.

Therefore, it can be concluded that option (d) is correct.

Learn more about risk here:

brainly.com/question/27754423

#SPJ4

Your question is incomplete, but most probably the full question was….

List of options:-

Select one:

a. Spiral Model

b. RAD model

c. Waterfall model

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6 0
1 year ago
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joja [24]

Answer:

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8 0
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