Given the following information, determine which beta coefficient for Stock A is consistent with equilibrium: E(ki) = 8.5%; kF = 4%; E(kM) = 12%. A) 0.80 B) 1.26 C) 0.56 D) 1.10 E) 1.00 ANSWER C
Date: September 19th, 2020
In relation to the New York Stock Exchange, which item below is not true of the American Stock Exchange? It A) lists lesser-known companies. B) includes many energy-related companies. C) is younger. D) actually lists more companies and is larger in terms of trading activity. ANSWER D
Date: September 19th, 2020
Inflation affects the EOQ model in all of the following ways EXCEPT A) increased carrying costs. B) encourages buying early to avoid price increases. C) changing the investment in accounts receivable. D) encourages anticipatory buying. ANSWER C
Date: September 19th, 2020
Asset p has a beta of 1.1. The risk-free rate of return is 4 percent, while the return on the market portfolio of assets is 12 percent. The asset’s required rate of return is: A) 6% B) 12.8% C) 5.4% D) 10% E) 9.5% ANSWER B
Date: September 19th, 2020
Assume that both Apple and Yahoo plot on the SML. Apple has a beta of 2.6 and an expected return of 21.2%. Yahoo has a beta of 0.90 and an expected return of 9.3%. The expected return on the market portfolio is 10%and the risk-free rate is 3%. If you wish to hold a portfolio […]
Date: September 19th, 2020
Newtown Manufacturing, Inc uses semi-hex joints in its manufacturing process. If Newtown’s total demand for the joints for next year is estimated to be 57,000 units, and if the cost per order is $225, what is Newtown’s economic order quantity of semi-hex joints? Assume that carrying costs for semi-hex joints are $0.75 per unit. A) […]
Date: September 19th, 2020
According to the security market line, there is no reward for waiting. In other words, in order to have any expected return at all, an investor must invest in risky assets. Indicate whether the statement is true or false. ANSWER Answer: FALSE Explanation: According to the security market line, there is a reward […]
Date: September 19th, 2020
What is the equation for the Security Market Line? Define each term. If an asset has a beta of 2.0, what type of return should it realize compared to the market portfolio? What will be an ideal response? ANSWER Answer: The equation for the SML is E(ri) = rf + [E(rm) – rf] […]
Date: September 19th, 2020
The Road Ready Riding, Inc will use an estimated 24,000 wheel assemblies in its manufacturing process next year. The carrying cost of the wheel assembly inventory is $1.80 per wheel and the ordering cost per order is $50. What is Road Ready’s economic ordering quantity of wheel assemblies? A) 785 B) 997 C) 1,155 D) […]
Date: September 19th, 2020
Which of the following is not a widely-recognized problem with CAPM? A) The model is complex and poorly understood by many finance professionals. B) The model does not accurately explain stock returns over time. C) Other factors besides market risk may influence security returns. D) Beta values for any stock often change over time. E) […]
Date: September 19th, 2020
