American Paper Company has a beta of 1.2. The risk-free rate is 6 percent and the required return on the market is 14 percent. The required rate of return on the security is:
<h3>What Is the Security Market Line?</h3>
The security market line (SML) is a line drawn on a chart that serves as a graphical representation of the capital asset pricing model (CAPM)—which shows different levels of systematic, or market risk, of various marketable securities, plotted against the expected return of the entire market at any given time.
Its Also known as the "characteristic line," the SML is a visualization of the CAPM, where the x-axis of the chart represents risk (in terms of beta), and the y-axis of the chart represents expected return. The market risk premium of a given security is determined by where it is plotted on the chart relative to the SML
The formula for plotting the SML is:
Required return = risk-free rate of return + beta (market return - risk-free rate of return)
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Answer: Primary activity.
Explanation:
Value chain analysis occurs when an organization carefully analyses their activities to know areas they need to maintain and areas to improve on, to excel above their competitors. When an organization introduces new equipments to help enhance production, they are trying to improve on operations which is a primary activity in value chain analysis.
The rational expectations theory is a concept and theory used in macroeconomic.
what is rational expectations theory?
- The rational expectations theory could be a concept and modeling method that's utilized broadly in macroeconomics.
- The hypothesis sets that people base their choices on three essential variables: their human judiciousness, the data accessible to them, and their past experiences.
- The theory proposes that people’s current expectations of the economy are, themselves, able to impact what long-term state of the economy will gotten to be.
- This statute contrasts with the thought that government arrangement impacts monetary and financial decisions.
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Answer:
320 Investments—Debt and Equity Securities
10 Overall
25-4 Recognition
Answer:
B
Explanation:
Money as a medium of exchange means money can be used a means of payment. That is, money is used is sorting everyday transactions. Recall that there are three motives of holding money;
1. Transactionary
2. Precautionary
3. Speculative
Transactionary motive means you can use money to sort your everyday transactions.
Precautionary motive - You can save money for rainy days. (i.e. accident, sickness etc)
Speculative motive means you can use money to invest - make investment decisions with money (buy treasury bills, money market fund instruments, currency, etc)
All of the above motives can not be achieved if money does not serve as a means of payment.
Money as a medium of exchange means the legal tender (money) has a government backing.
