Consider the following data State of Nature Prob. Stock A Return Boom 0.3 16.00% Normal 0.6 14.20% Recession 0.1 8.00%   What is the expected return for Stock A? Group of answer choices 14.12% 12.14% 15.12% 14.00%

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A: In a leveraged buyout transaction, sale and purchase happened at two different price points. The…

Q: f I can buy a share now in BMW on the stock market for £30 or sell now for £28 what is the bid ask…

A: Bid price The quoted sale price in the market in which dealers want to purchase the share and an…

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A: The dividend is paid to equity shareholders as a share in the profit. The dividends are the amount…

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A: An OIS Interest rate swap is where the one of the underlying exposure is Overnight interest. OIS…

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A: To calculate the effective cost of debt we will use the below formula   Effective cost of debt =…

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A: There could be several reasons for an entrepreneur consider selling their business.

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A: Face value and maturity value (MV) = $1000 Coupon amount (C) = $120 (i.e. $1000 * 0.12) Yield to…

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A: Cost of capital refers to the amount of capital fund maintained as a portfolio of equity and debt.…

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A: The selling price and dividends are the cash inflows while the purchase price is the cash outflow…

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A: An equity market is referred as the place, where the shares as well as stocks of the corporation is…

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A: Margin is referred to as the type of deposit that an investor uses to place with their broker at the…

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A: Question) A nation’s scientists invent many new Internet search tools, raising current productivity…

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A: To calculate the WACC we will use the below formula   WACC = (Ke*We)+[Kd*(1-t)*Wd]   Where Ke - Cost…

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A: a) Accounts receivable turnover ratio:- net sales/average account receivables. b) Days of accounts…

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A: Given,  The Cost of new machine is $180,000 The cost of old system is $140,000 Salvage value is…

Q: The Royal Bank pays an interest rate of 0.6% on redeemable GICs and 0.75% on non-redeemable GICs.…

A: Solution:- The Royal Bank pays interest on the amount of GIC held with it. Now, in order to retain…

Q: discuss and describe in detail Small and Medium Enterprises?

A:

Q: If the minimum rate of return was 11% (instead of the percentage shown above), Division A's residual…

A: Information Provided: Minimum rate of return = 11% Operating Income = $81,900 Average Investment =…

Q: • Maturity: 5 years • Face value: $10,000 • Coupon rate: 4% (makes coupon payments every 6 months…

A: Price of bond is present value of coupon payment and present value of par value of bond taken on…

Q: 4.    Suppose, the INR65.4015/USD in the FX Market.  The selling price of the basic SONY LED TV is…

A: The PPP that purchasing power parity says that prices of goods should be equilibrium that means…

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A: Data given: Income Scales (TRY) Rate (%) Up to 14,800 15 14,801 - 34,000 20…

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A: Bond 1: Annual coupon rate = 6% Semi-annual rate = 6%/2 = 3% Dirty price “P” = $99.50 Let Face Value…

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A: The concept of the time value of money states that between the same amount available now and…

Q: Question: Should I make the investment in this property based on the information have given? Use the…

A: IRR refers to the internal rate of return. It is that rate at which the NPV (net present value)…

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A: There are two types of markets: 1. Money market 2. Capital market ------------------------------…

Q: A risk-free asset by definition has a beta of zero. OA. True B. False

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A: Spot rate refers to the price that quotes for the immediate settlement related to interest rate,…

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A: Mortgage is referred as the kind of loan, which helps in purchasing or maintaining the land, home,…

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A: The P/E ratio is very important in the valuation of the firm and it show how is the firm going to do…

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A: Interest rate is 5.92% compounded semi-annually Amount repaid is $3,055 every 6 month Time period is…

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A: Cash flow from operating activities consists of cash inflows and cash outflows from day to day…

Q: What is meant by positive financial leverage?  What about negative financial leverage?

A: Leverage -It refers to the use of source of funds  for which the firm has to pay a fixed cost.

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A: Borrowing to purchase an asset: An asset can be purchased by taking a loan from a financial…

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A: Pure Expectation theory of interest rate states that the return of holding two year bond is the same…

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A: As we are provided with the expense and income structure of both the individuals. First have to find…

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A: Dealer markets: A dealer market is a market in which they post the prices at which they would be…

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A: Mutual funds: They are the institutions which collects money from different investors and then…

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A: Moral hazard is referred as the situation, where one party used to get involved in the risky event,…

Q: j. Bonds Payable - Series 1 On January 1, 2015, Hazer issued $400,000 12% 10-year bonds. Interest is…

A: Bond refers to the borrowing security issued by the company to raise funds from the market by making…

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A: Average fixed cost = (current selling price * cost of capital)/ 10,000 room nights.   Break even…

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A: Introduction  Operating leases require lease expenses to be recognized on a straight-line basis over…

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A: Given: Particulars Amount Amount(PMT) $600 Interest rate 3%

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A: Loans and mortgages are given on the basis of capacity to pay back the loan that is based on monthly…

Q: What are some of the major differences between loans for residential and commercial real estate?

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Q: Jane has been given an opportunity to receive 20,000, six years from now. If she can earn 10% on her…

A: Present value is the current value of a future cash flow discounted to the present terms at a…

Q: a. Advance payments of $25,000 every six months for 5 years b. Payments of $9,000 quarterly for 4…

A: Present value is the concept of the time value of money. Which states future cash flow is less…

Q: Work out the value of European Call on a risky asset A, currently selling at $600. The European Call…

A: Using Black Scholes we can compute the value of the call option. The formula is as follows:C = S…

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary. 

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.