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romanna [79]
2 years ago
13

Assume that the economy has three types of people. 20% are fad followers, 75% are passive investors and 5% are informed traders.

The portfolio consisting of all informed traders has a beta of 1.4 and an expected return of 12.4%. The market has an expected return of 10% and the risk-free rate is 4%. The expected return for the fad follower's portfolio is closest to:__________.
a. 11.5%
b. 13.6%
c. 16%
d. 12.4%
Business
1 answer:
mojhsa [17]2 years ago
3 0

Answer: a. 11.5%

Explanation:

Fad followers are those investors who follow a trend when it emerges and as such their betas will be less than that of informed traders because the informed traders would have acted first.

Using the Capital Asset Pricing Model to calculate expected return.

Er = Rf + b( Rm - Rf)

Er = Expected return

Rf = Risk Free Rate

b = Beta

Rm = Market Return.

The Expected Return for the Informed Investors is,

= 4% + 1.4 ( 10% - 4%)

= 4% + 1.4 ( 6%)

= 12.4%

With the Fad followed expected to have a lower beta and therefore a lower expected return than the Informed Investors, the only suitable option is the 11.5%.

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Answer:

Option (B) is correct.

Explanation:

Given that,

Total assets (Beginning) = $800,000

Total assets (Ending) = $900,000

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Average assets = [Total assets (Beginning) + Total assets (Ending)] ÷ 2

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Purdy's asset turnover:

= Sales ÷ Average assets

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Answer:

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Explanation:

The total economic cost per year is equal to the sum of:

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* The opportunity cost relating to sacrificing the interest income earned on $10,000 saving, which he is now used for purchasing equipment, which is calculated as: 10,000 * current rate of savings = 10,000* 5% = $500 ( total cost of equipment is not included because e could sell the equipment for what he​ paid later on).

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Answer:

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Explanation:

Guerrilla Marketing:

It is a such type of marketing strategy in which we use non-traditional ways to accomplish our marketing goals. This unconventional way of marketing is directed towards developing an emotional between a business/organization and its customer.

Example:

The common example of guerrilla marketing is as follow:

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In our case, Warren Cassell use this strategy of marketing by offering them free gift-wrapping, free autographed copies of books etc so that the customer develop a very strong emotional bond with the book store. As a result, they will tell other people about her generosity and will help her to expand her business.    

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Answer:

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