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%.
Answer:
$9,000
Explanation:
The computation of the amount of the discount on the bonds at issuance is shown below:
= Par value of the bond - issued price of the bond
= $400,000 - $391,000
= $9,000
By deducting the issued price of the bond from the par value of the bond we can get the discount amount on issuance of the bond and the same is applied above
Answer:
price = $47.82
Explanation:
Find the present value of each dividend at the required rate of return and sum them up to get the current price;
PV = FV /(1+r)^n
PV(D1) = 3.55/ (1.099^1) = 3.2302
PV(D2) = 4.65/ (1.099^2) = 3.8500
PV(D3) = 5.85 / (1.099^3) = 4.4072
PV(Price at t=4) = 53 / (1.099^4) = 36.3316
Price = 3.2302+2.9392+4.4072+36.3316
= 47.81897
Therefore, price = $47.82
Answer: The correct answer is (A): planning and gathering financial information.
Explanation: Forecasting technique is used while planning and gathering financial information. This step helps in predicting revenue. Formulation of financial budget depends on the size and type of the business. This information is used by organization for developing their budgets. It helps to forecast the future, anticipate risks and prevent them.
