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SVETLANKA909090 [29]
2 years ago
9

Consider a risky portfolio. The end-of-year cash flow derived from the portfolio will be either $70,000 or $200,000 with equal p

robabilities of .5. The alternative risk-free investment in T-bills pays 6% per year.
a. If you require a risk premium of 8%, how much will you be willing to pay for the portfolio? (Round your answer to the nearest whole dollar amount. Omit the "$" sign in your response.)

Price________$

b.Suppose that the portfolio can be purchased for the amount you found in (a). What will be the expected rate of return on the portfolio? (Round your answer to the nearest whole number. Omit the "%" sign in your response.)

Rate of return______%

c.Now suppose that you require a risk premium of 12%. What is the price that you will be willing to pay? (Round your answer to the nearest whole dollar amount. Omit the "$" sign in your response.)

Price_______$
Business
1 answer:
xenn [34]2 years ago
4 0

Answer:

A) 964,286

B) 14

C) 750,000

Explanation:

The portfolios expected return = (0.5 x $70,000) + (0.5 x $200,000) = $35,000 + $100,000 = $135,000

If the risk free investment yields 6% per year, and you require a risk premium of 8%, then the total interest rate that the portfolio yields must be 6% + 8% = 14%

you will be willing to pay: $135,000 / 14% = $964,286 for the portfolio

if the risk premium increase by 4%, then the price of the portfolio will decrease to: $135,000 / 18% = $750,000

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You are the manager of a midsized company that assembles personal computers. You purchase most components—such as random access
lapo4ka [179]

Since the company is a mid sized company, with the increase in the price of the inputs of the RAM, the price of the RAM will definitely increase.

<u>Explanation:</u>

1) Since the price of the inputs of a particular good are one of the most important factors which determine the price of the goods, so with the increase in the inputs of the price of the inputs of the good, the price of the good will increase.

2) With the fall in the income of the consumer, the expenditure of the consumer will also decrease. So the demand of the RAM will fall because of two reasons a) increase in the price of RAM and 2) with the fall in the income of the consumer.

6 0
2 years ago
You have $5,000 to deposit. Regency Bank offers 15 percent per year compounded monthly (1.25 percent per month), while King Bank
aliya0001 [1]

Answer:

Regency Bank

A = $98577.46

king Bank

A = $81832.68

Explanation:

Given Data:

principle amount  =$ 5000

rate of interest = 15%

n =12 {compounded months}

t = 20 year

for Regency Bank

investment amount obtained as

A =P\times [1 + \frac{r}{n}]^{nt}

A = 5000 [1 + \frac{0.15}{12}]^{12\times 20}

A = $98577.46

for King Bank

Investment amount obtained as

A =P\times [1 + \frac{r}{n}]^{nt}

Here n = 1

A = 5000 [1 + \frac{0.15}{1}]^{1\times 20}

A = $81832.68

3 0
2 years ago
Seth owns a local business that provides email updates on surf conditions. He is the only supplier of these email updates in San
klasskru [66]

Answer:

Seth's total profits is $1,535.359

Explanation:

According to the given data we have the following:

MC = 0 and we will ignore fixed costs

Therefore TC = 0  

Demand function in Santa barbara is

p = 74 - q  

MR = 74 - 2q

Since Seth sets different uniform prices in two markets to maximizes his profit therefore ,

MR = MC  

74 - 2q = 0  

2q = 74

q=37

p = 74 - 37 = 37

Profit = pq - TC

= 37*37 - 0  

= $1,369

Inverse demand finction Goleta is

p = 39 - 4q

MR = 39 - 8q

MR = MC

39 - 8q = 0  

8q = 39

q = 4.875

p = 39 - 4.875 = 34.125

Profit = pq - TC  

= 34.125*4.875 - 0  

= $166.359

Therefore, Seth's total profits =  $1,369 + $166.359

Seth's total profits= $1,535.359

Seth's total profits is $1,535.359

6 0
2 years ago
Johnson is an executive vice president at Conecom Hardware. He researches a proposal by a larger company, Openlane Hardware, to
WARRIOR [948]

Answer: Turn down the acquisition offer and prepare to resist a hostile takeover.

Explanation:

Since Johnson analysed the past performance of Openlane hardware and found out that past performance, conducting focus groups, and interviewing Openlane employees, Johnson concludes that the company has poor profit margins, sells shoddy merchandise, and treats customers poorly, then Johnson and Conecom Hardware should turn down the acquisition offer and prepare to resist a hostile takeover.

In this case, the merge between the companies will have a negative impact on Johnson and Conecom hardware due to the fact that the company has a bad reputation already and this can have an effect on Conecom. Therefore, the acquisition offer should be turned down.

5 0
1 year ago
At Richardson Manufacturing Company, there are two factors that determine the cost of health care. If an employee makes less tha
OLEGan [10]

Answer:

15%

Explanation:

Catherine is a departmental manager at Richardson

She earns $68,300 every month

She has family health care

Her employer contributes $935 every year towards total coverage Cost

The first step is to calculate the total contribution

Catherine rate for health care is $165 since her monthly pay is higher than $55,000

Total contribution = $165 + $935

= $1,100

Therefore the percent in which Catherine contributes towards total coverage can be calculated as follows

= 165/1,100 × 100

= 0.15 × 100

= 15%

Hence Catherine contributes 15% towards the total coverage

8 0
2 years ago
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