answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
zhuklara [117]
2 years ago
9

We have the following CAPM E(Ri) = .06 + .08 Beta; a) If Stock X has a beta of 2, what is the required rate of return? b) If we

form a portfolio that is invested 40% in Stock X and 60% in the risk free asset, the expected rate of return on that portfolio? What is the beta of that portfolio? Stock Z has a beta of 1.5 and an expected return of 15%. Is at a good buy? d)Construct a portfolio of Stock X and the risk free asset which has a beta of 1.5. what is c) e) What is the expected return for this purpose?
Business
1 answer:
sergiy2304 [10]2 years ago
4 0

Answer:

Please kindly go through explanation for the answers.

Explanation:

A)The required return if Beta is 2 = 0.06+0.08*2 =0.22

B)Here Rf = 0.06

Expected return of the portfolio = 0.4*22% + 0.6*6% =12.4%

since beta of Rf = 0,the expected beta = 0.4*2 = 0.8

C)Beta is nothing but systematic risk of a security in comparing to the market. In this case stock z having beta of 1.5 which is less than beta of stockX i.e 2. and expected return is 15%.so stockz is offering lower return at lower risk. If the investor is a risk averse its a good buy.

D) let W be portion of stock X.

Then w*2 + (1-w)*0 = 1.5

W = 1.5/2 =0.75

to construct a portfolio which has a beta of 1.5 we have to invest 75% of our money in stock X and remaining in risk free asset

E) expected return = 0.22*.75 +0.25*0.06 = 16.5% + 1.5% = 18%

You might be interested in
You are working closely with an experienced associate. He insists on completing a task a certain way, but you know there is a mo
iris [78.8K]
<h2>We can work on the efficient way after justifying with proper reason to the experienced associate.</h2>

Explanation:

Though the question is incomplete, I can understand what is actually expected and then providing solution from my point of view.

When you feel that your idea is better,

  • Calm down yourself to prepare for conversation
  • Place a request to the experienced associate to hear your view
  • Justify how your way is better than the view of experienced associate
  • Make sure that you do not dominate and give respect to his / her age
  • Be prepared for the cross question raised by the associate
  • Convey about the outcome achieved clearly
  • Use the right vocabulary
  • Be strong in what you want to convey and the same should not lead to conflict

8 0
2 years ago
Chiptech, Inc., is an established computer chip firm with several profitable existing products as well as some promising new pro
vaieri [72.5K]

Answer:

$11

Explanation:

"The required return for the computer chip industry is 15%, and the company has just gone ex-dividend (i.e., the next dividend will be paid a year from now, at t 1) (Round your answer to 2 decimal places.)"

g = ROE*b

g = ROE * (1-Payout ratio)

g = 20% * (1-0.5)

g = 10%

P0 = D1/k-g

P0 = D0(1+g) / k-g

P0 = 0.5(1+0.10) / (0.15+0.10)

P0 = $11

S0, the market price of Chiptech stock is $11

7 0
2 years ago
A manufacturing company has the following budgeted overhead costs: Indirect materials: $0.50 per unit; Utilities: $0.25 per unit
Darina [25.2K]

Answer:

Total overhead                       $

Indirect material ($0.5 x 200,000 units) = 100,000

Utilities ($0.25 x 200,000 units)             = 50,000

Supervisory salaries                                 = 60,000

Building rent                                              = 80,000

Total overhead                                             290,000

Overhead rate                = <u>Budgeted overhead</u>

                                           Budgeted direct labour hours

                                         = <u>$290,000</u>

                                              100,000 hours

                                         = $2.90 per direct labour hour

Explanation:

In this case, we need to obtain the total overhead, which is the total of indirect material, utilities, supervisory salaries and building rent.

Then, we will divide the total overhead by direct labour hours so as to determine the overhead rate.

8 0
2 years ago
Karen bought her house in 1980 for $78,500. In 2005, it was worth $850,000. What’s the rate of return on Karen’s investment?
motikmotik

Answer:

the rate of return on Karen investment is 10%

Explanation:

Given that

Bought price = P = $78500

Sale price = S =$850,000

Time priod = n = 25 years (1980 to 2005)

Based on the above information

The Rate of return is

= (S ÷ P)^(1 ÷ n) - 1

= ($850,000 ÷ $78,500)^(1 ÷ 25) - 1

= 0.099973

= 10.00%

hence, the rate of return on Karen investment is 10%

We simply applied the above formula

8 0
1 year ago
According to the "Negotiating Family Relationships" website you visited, if you and your siblings receive your allowance accordi
Lady_Fox [76]

Answer:

c. Market Pricing

Explanation:

Market pricing is based on the competition based strategy. In this strategy a company evaluate the price of only those products that are similar to the products that are offered by the company or in our case the parents of the family are evaluating the price of similar tasks that are performed by the siblings.

8 0
2 years ago
Other questions:
  • Cindy wants to open a retail store in the mall where she can sell a few carefully selected lines of women's clothing. if cindy o
    8·1 answer
  • Based on his 14 Points, Deming is a strong proponent of :
    6·1 answer
  • Arthur is 10 years old. Tuition for one year at a public two-year college is $3,125. In 8 years, tuition is expected to increase
    7·2 answers
  • 1. (20 total points) Suppose the demand for a product is given by QD = 50 – (1/2)P.a) (10 points) Calculate the Price Elasticity
    12·1 answer
  • Which tasks are done by both historians and detectives? Check all that apply.
    6·2 answers
  • All other things being equal, a company that sells multiple products should attempt to structure its sales mix so the greatest p
    9·1 answer
  • Pigot Corporation uses job costing and has two production departments, M and A. Budgeted manufacturing costs for the year are as
    9·1 answer
  • In increasingly fast-paced markets, price and technology are not enough. ________ is the factor that will often give a company i
    10·1 answer
  • Agent Emily's listing was sold by another agent in her brokerage. Emily is entitled to a:______.a. selling side commission.
    14·1 answer
  • Pearson Motors has a target capital structure of 45% debt and 55% common equity, with no preferred stock. The yield to maturity
    8·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!