Answer:
C. 7.81%
Explanation:
Stock A and Stock B expected Return shall be calculated using the following formula:
Stock A/B expected [email protected]*Return at [email protected]*Return at [email protected]*Return at Recession.
Stock A return=0.21*18.9%+0.74*15.8%+0.05*-24.6%
=14.43%
Stock B return=0.21*9.7%+0.74*7.6%+0.05*4.2%
=7.87%
Market risk premium=(Stock A Return- Stock B return)/0.84
Market risk premium=(14.43%-7.87%)/0.84=7.81%
So Based on the above explanation, the answer shall be C. 7.81%
Answer:
d. Corporations pay income tax on corporate earnings, and shareholders pay personal income tax on corporate dividends and gains from the sale of stock.
Explanation:
At the end of each accounting period, the corporation is expected to pay a tax known as income tax from the taxable income earned by the corporation. This tax is paid by the corporation before the amount to be paid to the shareholders of the company in form of dividends.
The shareholders of the company are further subjected as individuals to personal income tax.
This is known as double taxation of dividend. Gains from sale of stock are also taxed under personal income tax.
Answer:
A share of Citigroup stock represents a claim on Citigroup's assets that gives the purchaser a share of the corporation.
Depending on whether you are an investor or the corporation, a bond is more or less riskier than a stock.
If you are an investor, buying a bond is safer than buying stock since in a worse case scenario where the company goes bankrupt, bond holders are paid before than stockholders. Also bonds provide fixed periodic payments (coupons) and a final payment of the face of the bond at maturity date.
If you are the corporation, issuing bonds is riskier than issuing stock since you have the obligation of making fixed periodic payments to bondholders (coupons) and must pay the face value at maturity date. On the other hand corporations don't have any legal obligation to pay dividends.
Answer:
True
Explanation:
Prevention Cost is the cost which is incurred to avoid the loss due to defects in the products manufactured, here the cost incurred is as follows:
Training employees that is the benefit from training will be reducing cost and improving quality of the product, therefore, it will be considered as prevention costs.
Further cost incurred for redesigning products and processes will improve the quality of the product and the process therefore this cost can also be considered as prevention costs.
Final Answer
The above statement is true.
Answer:
B. Persons on fixed incomes.
Explanation:
Inflation is a general increase in prices and fall in the purchasing value of money, therefore, a person with a fixed income will not be affected.
