Business, 24.06.2019 16:50 sarmientojose267

Which of the following statements is correct? a. if mutual fund a held equal amounts of 100 stocks, each of which had a beta of 1.0, and mutual fund b held equal amounts of 10 stocks with betas of 1.0, then the two mutual funds would both have betas of 1.0. thus, they would be equally risky from an investor's standpoint, assuming the investor's only asset is one or the other of the mutual funds. b.if investors become more risk averse but rrf does not change, then the required rate of return on high-beta stocks will rise and the required return on low-beta stocks will decline, but the required return on an average-risk stock will not change. c.there is no reason to think that the slope of the yield curve would have any effect on the slope of the sml. d.an investor who holds just one stock will generally be exposed to more risk than an investor who holds a portfolio of stocks, assuming the stocks are all equally risky. since the holder of the 1-stock portfolio is exposed to more risk, he or she can expect to earn a higher rate of return to compensate for the greater risk. e.assume that the required rate of return on the market, rm, is given and fixed at 10%. if the yield curve were upward sloping, then the security market line (sml) would have a steeper slope if 1-year treasury securities were used as the risk-free rate than if 30-year treasury bonds were used for rrf.

Answers: 3

Show answers

Another question on Business

Business, 21.06.2019 23:00

Which of the following statements is correct? large corporations are taxed more favorably than sole proprietorships. corporate stockholders are exposed to unlimited liability. due to limited liability, unlimited lives, and ease of ownership transfer, the vast majority of u.s. businesses (in terms of number of businesses) are organized as corporations. most businesses (by number and total dollar sales) are organized as partnerships or proprietorships because it is easier to set up and operate in one of these forms rather than as a corporation. however, if the business gets very large, it becomes advantageous to convert to a corporation, mainly because corporations have important tax advantages over proprietorships and partnerships. most business (measured by dollar sales) is conducted by corporations in spite of large corporationsâ€™ often less favorable tax treatment, due to legal considerations related to ownership transfers and limited liability.

Answers: 3

Answer

Business, 22.06.2019 03:00

Sonic corp. manufactures ski and snowboarding equipment. it has estimated that this year there will be substantial growth in its sales during the winter months. it approaches the bank for credit. what is the purpose of such credit known as? a. expansion b. inventory building c. debt management d. emergency maintenance

Answers: 1

Answer

Business, 22.06.2019 06:30

Ummit record company is negotiating with two banks for a $157,000 loan. fidelity bank requires a compensating balance of 24 percent, discounts the loan, and wants to be paid back in four quarterly payments. southwest bank requires a compensating balance of 12 percent, does not discount the loan, but wants to be paid back in 12 monthly installments. the stated rate for both banks is 9 percent. compensating balances will be subtracted from the $157,000 in determining the available funds in part a. a-1. calculate the effective interest rate for fidelity bank and southwest bank. (do not round intermediate calculations. input your answers as a percent rounded to 2 decimal places.) a-2. which loan should summit accept? southwest bank fidelity bank b. recompute the effective cost of interest, assuming that summit ordinarily maintains $37,680 at each bank in deposits that will serve as compensating balances

Answers: 1

Answer

Business, 22.06.2019 08:00

Shrieves casting company is considering adding a new line to its product mix, and the capital budgeting analysis is being conducted by sidney johnson, a recently graduated mba. the production line would be set up in unused space in the main plant. the machinery’s invoice price would be approximately $200,000, another $10,000 in shipping charges would be required, and it would cost an additional $30,000 to install the equipment. the machinery has an economic life of 4 years, and shrieves has obtained a special tax ruling that places the equipment in the macrs 3-year class. the machinery is expected to have a salvage value of $25,000 after 4 years of use. the new line would generate incremental sales of 1,250 units per year for 4 years at an incremental cost of $100 per unit in the first year, excluding depreciation. each unit can be sold for $200 in the first year. the sales price and cost are both expected to increase by 3% per year due to inflation. further, to handle the new line, the firm’s net working capital would have to increase by an amount equal to 12% of sales revenues. the firm’s tax rate is 40%, and its overall weighted average cost of capital, which is the risk-adjusted cost of capital for an average project (r), is 10%. define “incremental cash flow.” (1) should you subtract interest expense or dividends when calculating project cash flow?

Answers: 1

Answer

You know the right answer?

Which of the following statements is correct? a. if mutual fund a held equal amounts of 100 stocks,...

Questions