You have observed the following returns over time: Year Stock X Stock Y Market 2017 14% 12% 13% 2018 21 7 8 2019 -13 -7 -11 2020 3 2 3 2021 20 9 14 Assume that the risk-free rate is 6% and the market risk premium is 5%.

Q: A company estimates that it can sell 4,000 units each month of its product if it prices each unit at…

A: When 4000 units are sold: Sale Value = 4000*80 = $3,20,000 Total Cost = Fixed Cost + Unit Production…

Q: A home appliance manufacturing company plans to invest what it considers "temporary excess fund" in…

A: Bonds: Bonds are the liabilities of the company which is issued to raise the funds required to…

Q: explain whether true or false : The interest rate parity does hold in realty

A: Interest rate parity is an releationship between spot exchange rate and the forward exchane rate…

Q: Use the following information to answer this question. In your answers, ignore the negative sign, if…

A: Yield spread between two bonds The yield spread between two bonds is the yield of one bond less the…

Q: There are two projects under consideration by the Rainbow factory. Each of the projects wil require…

A: Net present value is the difference between Present Value of cash Inflows and Present Value of cash…

Q: The United States has a comparative advantage in -skilled lator. This explains why the U.S. is a net…

A: Skilled labor refers to workers who are highly trained, educated, or experienced and can do more…

Q: You are looking to buy a $275,599.00 home in Haverhill. If Bank of America will give them a 30-year…

A: Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…

Q: 3. Suppose a certain bond sold a volume of 2, 375, 000. If the bonds sold for $824.99, calculate the…

A: Given, Meaning of a bond, Bond is an  instrument of debt which is  floated by the company so that…

Q: A home appliance manufacturing company plans to invest what it considers "temporary excess fund" in…

A: The present value of the bond is the price that the buyer has to pay to obtain the bond today. The…

Q: NCC Corporation is considering building a new facility in Texas. To raise money for the capital…

A: Here, Weight of Bond (Wb) is 40% Weight of Retained Earnings (We) is 60% Interest Rate on Bond (rd )…

Q: Current assets minus current llabilities Is: Multiple Cholce Working capital. Financial leverage.…

A: Current assets means cash and cash equivalent and other assets which are realisable with in normal…

Q: Macy's was selling Calvin Klein jean shirts that were originally priced at $46.00 for $8.74. a. What…

A: Given: Particulars Amount Original price $46.00 Discount price $8.74

Q: Gregor and Greta have planned to sell 300 bags together in each market. They plan to visit 24…

A: The average selling price multiplied by the number of units sold yields revenue, which is computed…

Q: Martinez Co. borrowed $71,059 on March 1 of the current year by signing a 60-day, 5%, interest-…

A: Solution:- Interest bearing note is a short term source of finance, from which funds are raised for…

Q: A company is considering the following two dividend policies for the next five years. Year Policy #1…

A: Here,

Q: PROBLEM: 1. A man bought an equipment consisting Php 60,000 payable in 12 quarterly payment, each…

A:

Q: A family currently live in an apartment whose monthly rent is $1050. They are thinking of buying a…

A: The condition or reality of legal possession and control over property, which can be any tangible or…

Q: There are two types of bond O Treasury and Municipal

A: The bonds are debt instruments that carry the payment of interest and also the face value is paid on…

Q: Which one of the following statements is correct?    Real rates must exceed inflation rates.    Real…

A: Real interest rate= Nominal interest rate - Inflation rate In real interest rate, the effect  of…

Q: what factors aided rockwater in it's smooth switch to the balanced scorecard

A: In finance balanced scorecard is often used as a performance measurement system. It includes…

Q: Select the correct answer. You invest in a fund and it is expected to generate S3,000 per year for…

A: The following information has been provided in the question: Future value = $3000 per year Time = 5…

Q: 20. Ron and Sandy have purchased their first house. They borrowed $174, 000 for 30 years at an…

A: Solution: Total monthly payment will be the total of equal monthly instalment and monthly insurance…

Q: HOUSE IN EMIRATES HILLS, DUBAI Tareq is about to make his dream of a house of his own come true.…

A:

Q: ne financial manager of Apple Co. is evaluating Banana quisition. Banana Co. is expected to produce…

A: When two different entities join forces to form a new, combined entity, it is called a merger.An…

Q: Jessica has identified a stock pattern showing a head-and-shoulders bottom formation and its price…

A: Head and shoulder bottom formation shows that after a long period of increase the prices are going…

Q: Your father offers you a choice of $105,000 in 12 years or $47,000 today. а. If money is discounted…

A: Time Value of Money: According to this basic financial concept money in the present have more value…

Q: Elearning Company would like to develop its technology process by purchasing a production equipment…

A: PV of Inflow = 32*(1+i)^-1 + 40*(1+i)^-2 + 46*(1+i)^-3 + 52*(1+i)^-4 PV of Outflow = 115 million NPV…

Q: Explain the difference between the unbiased expectations theory of the term structure of interest…

A: There are different theories that describe how the interest rates are set.

Q: ars, what will their payment and the total cost of their loan be?

A: Loan Amount: It refers to the amount borrowed by the borrower from the bank. The borrower pays the…

Q: 15. Net profits after taxes are defined as * gross profits minus operating expenses. sales revenue…

A: Earnings before interest and taxes: Earnings before interest, depreciation and taxes are the…

Q: At one time, it was felt that liability insurance would undermine the tort system, which has as its…

A: Liability insurance is essential for individuals who are accountable and at fault for the injuries…

Q: Explain how mortgage-backed securities, collateralised debt obligations and credit default swaps are…

A: Mortgage backed securities: Mortgage is a loan secured by some real estate property or commericial…

Q: explain how capital asset pricing model (CAPM) won a novel prize.

A: Meaning of capital asset pricing model(CAPM), It is a model which is related to the determination…

Q: You are an inventor with a great business idea but no money. You have approached a venture…

A: Given: Investment by Venture Capitalist = $150 million Annual return = 40% forever but earnings for…

Q: The size of the monthly payment required to pay off the loan over the 30-year period The total…

A: Here we will use the concept of compounding and the concept of time value of money. The time value…

Q: Consider the following investment in CURRENT DOLLARS The trem (minimum acceptable rate of return), m…

A: Real rate is the rate which excludes the impact of inflation in the economy, while nominal rates are…

Q: Q1: Below is the population of the city in lenses taken once every 10 years. Estimated population in…

A: Solution:- Estimated population can be computed through using constant annual growth rate. We know,…

Q: interest, compounded monthly, how much do they need to deposit each month in order to make the…

A: Future Value: It refers to the future value of a present amount and is estimated by compounding the…

Q: An asset is planned to be purchased with an initial value of $400,000 and an estimated salvage value…

A: Free cash flow is the residual cash available with the company after paying all expenses and taxes.…

Q: Mike Energy has been paying dividends steadily for 20 years. During that time, dividends have grown…

A: Solution:- Cost of common equity means the required rate of return of equity shareholders. It is…

Q: 1. You are considering the purchase of an apartment building with the following information:…

A: It is given that: Purchase price - $12,500,000 Year 1 NOI - $1,000,000 Growth – 4% Holding period –…

Q: What are governance mcechanisms that help align the incentives of stockhlers and managers  - help…

A: The interest of stockholders and managers are often not aligned. Stockholders are owners of a…

Q: Calculate the present value of this infinite future payment of $100

A: Time value of money (TVM) refers to the method used to measure the amount of money at different…

Q: D Current assets Current liabilities

A: In finance current ratio is an important financial ratio. We use this ratio to determine the…

Q: What are municipal bonds? What characteristics makes them especially attractive to high-income…

A: The state government issues municipal bonds. They can be thought of as a risk-free investment…

Q: Consider a $230,000 home mortgage in which the payment per month is $945.38 for a thirty-year…

A: A Loan refers to the amount of money taken by one party named borrower from the other party named…

Q: Which of the following statements is not true about small-cap mutual funds? Small-cap funds derive…

A: Small-cap mutual funds can be defined as those mutual funds which are invested in smaller companies…

Q: Imagine you are the project manager at an investment firm and given the task of preparing a report…

A: (Note: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the…

Q: b) Calculate the discount yield, and bond equivalent yield on a $1 million treasury bill that…

A: Given, Discount yield:- It is a way of calculating the return of the bond when it is sold @ a…

Q: You are a manager at Percolated Fiber, which is considering expanding its operations in synthetic…

A: Initial Investment  $    2,50,00,000.00 Sales revenue  $    3,00,00,000.00 Cost of goods sold  $…

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.