Answer:
Alpha for A is 1.40%; Alpha for B is -0.2%.
Explanation:
First, we use the CAPM to calculate the required returns of the two portfolios A and B given the risks of the two portfolios( beta), the risk-free return rate ( T-bill rate) and the Market return rate (S&P 500) are given.
Required Return for A: Risk-free return rate + Beta for A x ( Market return rate - Risk-free return rate) = 5% + 0.7 x (13% - 5%) = 10.6%;
Required Return for A: Risk-free return rate + Beta for B x ( Market return rate - Risk-free return rate) = 5% + 1.4 x (13% - 5%) = 16.2%;
Second, we compute the alphas for the two portfolios:
Portfolio A: Expected return of A - Required return of A = 12% - 10.6% = 1.4%;
Portfolio B: Expected return of B - Required return of B = 16% - 16.2% = -0.2%.
The key movements via are to increase the economy consist of a decreased bargain fee, buying government securities, and a decreased reserve ratio.
<h3>When the Fed makes use of contractionary policy?</h3>
When GDP in a kingdom is growing too fast, inflicting inflation to grow past a suited charge of two%, central banks will put in force a contractionary economic coverage. The Federal Reserve, or any principal financial institution, has three primary pieces of equipment to reduce the money supply.
A direct advantage of contractionary economic coverage is that it strengthens government budgets. As an instance, whilst the Fed's bargain price increases, the government earns extra cash from the banks that borrow budget from the Fed's cut price window. The government can use this supply of sales to offset spending and decrease price range deficits.
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Specialization in production will increase output.
As any specialization in production will be achieved by specialized labor or technology, both the factor will produce per unit time and gives a comparative advantage.
Specialization is a production method that focuses on the production of a limited range of goods for a company to achieve a higher level of efficiency.
The more they focus on their work, the more efficient they are in that work. This means less time and money is spent producing goods. In other words, you can produce more goods in the same amount of time and money.
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Answer:
The dam should be constructed. The investment discounted payback is 25 years.
Explanation:
We have to make a cash flow for this case with the given data. See the document attached.
We consider an Initial cost of 30 millions in period 0, then we have every periods benefit of 2.800.000 and 100000 direct cost.
With those, is obtained net cash flow for each year (period), if we consider the given rate of interest, can be calculated the discounted cash flow
To know when this project covers all the investment, we have to consider the cumulative discounted cash flow. We have to see in the cash flow chart when the cumulative discounted cash flow break the 0 (became higher than 0).
In this case , that will be at period 25. So we have to wait 25 years to recover the initial cost. Considering that the dam usually has a lifetime higher than that time, the project at this scenario, should be done.
In the long run, the increase in money growth will change price levels and inflation.
<h3>What is money neutrality?</h3>
Money neutrality is an economic theory that changes in money supply do not affect real variables but only affect nominal variables. As a result, monetary policy is neutral in the long-run and affects real variables in the short-run.
Here are the options: (A) The price level. (B) The level of technological knowledge. (C) The quantity of physical capital. (D) The inflation rate.
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