Treasury bill rate is 2%, and the expected return on the market portfolio is 8%. Using the capital et pricing model: 1. What is the risk premium on the market? 2. What is the required return on an investment with a beta of 2? 3. If an investment with a beta of 0.6 offers an expected return of 7%, is it overpriced or underpriced?
Q: B Price (dollars b с d 0 h MC D MR Jk Quantity (units per week)
A: In a monopoly, there is a single firm producing a unique product. The firm has full control over the…
Q: rice Question 5 What would happen to equilibrium price and equilibrium quantity of khaki pants if...…
A: The demand curve depicts that there exists an inverse relationship between price and quantity…
Q: The CPI measures the pace of inflation or deflation. True or False True False
A: CPI( consumer price index) is the price of weight average of a consumption basket.
Q: 2. Use the data below to do a 3 year and 5 year mov Explain what happens to the data. Year Data 1996…
A: *Answer:
Q: Given the demand and supply functions for a particular commodity: QD 294.7-4.963P Qs 139.6 +21.34P…
A: Qd = 294.7 - 4.963P Qs = 139.6 + 21.34P
Q: stina's Costs and Revenue mantity Average Variable Average Total Cost (dollars) Marginal Cost…
A: In monetary hypothesis, perfect competition happens when all organizations sell indistinguishable…
Q: The Shell Corporation has a 34% tax rate and owns a piece of petroleum-drilling equipment that costs…
A: Given information First cost=$119000 Annual revenue=$33100 Salvage value=$31600 CCA rate=30% Tax…
Q: A firm faces the demand schedule p=120−3q and the total cost schedule TC=120+36q+1.2q2 a.…
A: Profit refers to the difference between total revenue and total cost. Total revenue is price…
Q: you assume that a firm has a U-shaped average cost curve, why would large and small firms have…
A: The economies and diseconomies of scale lead to the U shaped average cost curve.
Q: 1) Suppose that market demand is linear, q = 70 - p. Marginal costs are constant and equal to 10.…
A: We have two monopolist at different stages of production and sales.
Q: Suppose the cross-price elasticity of tea with respect to the price of coffee is 0.6, and the price…
A: Cross elasticity of demand is defined as the measurement of the relative change in quantity demanded…
Q: 4. Measuring Risk: Suppose you have a risk free asset with return ry = 5%. Additionally, t whole…
A:
Q: 5) (KEY QUESTION) Consider the following data assuming that these are the only products produced and…
A: "Since you have asked a question with multiple sub-parts, we will solve the first three sub-parts…
Q: Any charge that is not airfare is referred to as ancillary revenue for airlines—and they are…
A: Meaning of Microeconomics: The term macroeconomics refers to that situation under which the…
Q: Consider two mutually exclusive alternatives: Year Y 0 - $5,000 -$5,000 $5,000 HHHH -3,000 +2,000…
A: Answer; In order to determine which Alternative needs to be selected we will determine NPV of bith…
Q: Sherry has a goal of retiring with $371,060 by making weekly deposits into an investment account…
A: Provided retiring amount = $371,060 annual interest rate = 1.6% 0r weekly interest rate = 1.6%/52 =…
Q: lgs Review view Help 5-7.D(x) = 2(x-3)² is the price, in dollars per unit, that consumers will pay…
A: * SOLUTION :-
Q: Consider a monopolist with the following demand and cost function: Demand: P = 200 -0.10 Cost: C =…
A: We have downword sloping demand for monopolist and given cost function a function of Q.
Q: The money multiplier is the ratio of O the money supply to the monetary base OM2 to M1 O deposits to…
A: The money multiplier can be described as the disproportionate increase in the amount of money in a…
Q: Consider the following utility functions for wealth w: (i) u(w) = 3w, (ii) u(w) = w^1/3, (iii) u(w)…
A: We have 4 different types of utility functions and given w=1
Q: ecisions for Tomorrow Suppose a person who is developing a card game crowdfunds $40,000 and holds…
A: The money supply and credit creation capacity of bank depends on the reserve ratio. The lower the…
Q: Sharon was laid off from her job but has decided to go back to school full ti Which of the following…
A: Labor force is the sum of people who are employed or unemployed. Employed people are those who are…
Q: Which of these is NOT a factor of economic growth? O decrease in the savings rate investment in…
A: Economic growth is defined as an increase in the stock of final goods and services from one period…
Q: If inflation is less than expected, who benefits? Please include one or more examples in your…
A: Inflation is defined as an increase in the overall price of goods and services in a given economy.…
Q: If the monopolist is incurring a short run economic loss, what are some options the monopolist has?…
A: Note:- Since we can only answer one question at a time, we'll answer the first one. Please repost…
Q: How does the government budget deficit impact interest rates, investment, and economic growth?…
A: Government Budget deficit When spending surpass receipts, a budget deficit occurs, and it can be a…
Q: Which statement explains how people working in their own self-interest produce goods, services, and…
A:
Q: A couple recently got preapproved on a loan for their first house purchase. They are speculating on…
A: Low bid refers to the minimum amount of bid that a buyer can bid. This is possible if a seller is…
Q: Assume the government makes no fiscal policy changes when the economy experiences a downturn. Which…
A: In the mentioned question we have been asked what would be expected when the economy is turndown.
Q: discuss and analyze a current event in economics.
A: Economics is the study of the scarcity of resources and unlimited wants. The unlimited wants can be…
Q: High tax rates that put money into the government's funds tend to slow spending, and ultimately slow…
A: Tax: The word tax refers to the compulsory payment which is imposed by the government. It is also an…
Q: Define each of the following markets: Monopoly, Perfect competition, Monopolistic Competition, or…
A: Monopoly is a type of market in which there is single seller of the product. It means that product…
Q: If a Japanese car costs P*=1,000,000 yen, a similar American car costs P= 20,000, and a dollar can…
A: As it is given japanese car cost p*=1,000,000 yen american car cost p=20,00 e=100 yen/$
Q: What changes occur in the graph of Tina's demand curve as the price of bottled water rises? As the…
A: Answer is given below
Q: Which of the following would lead to an increase (rightward shift) in the demand for money? an…
A: The demand for money represents the total amount of money that the people of an economy wants to…
Q: 2) Using the (simpler) demand function f(q) = { (1-q) for 0 ≤ q≤1 0 for q ≥ 1 and assuming three…
A: Given information Three producers = i,j,k Demand condition f(q)=1-q when 0=<q<=1 q=0 when…
Q: I buy a car for $25,000. I $550 monthly. pay The loon is 5 years. What is the interest rate A он…
A: FV = 25,000 Monthly Payment = 550, Time = 5 Years
Q: Today, you invest ₱100,000 into a fund that pays 25% interest compounded annually. Three years…
A: The realistic portrayal of each money related esteem with time is known as cash flow diagram. The…
Q: A monopolist sets the price at $10.At this price the absolute value of the elasticity of the demand…
A: The private gain from selling an additional output unit is a monopolist's marginal revenue. The…
Q: Consider the following game between a monopolist and an entrant: Entrant Build Don't Build Build 0.5…
A: The sequential game refers to game where one player moves first and it is followed by other player.
Q: The growth in the velocity of M2 has been steady at about 2% since 1950 so we figure it will stay…
A: Answer; We Know That Inflation in Future ( P)= 5% Rate Of Growth Of Real Output (Y) =…
Q: What is the difference between digital banking and branch banking?
A: The term "digital banking" refers to banking conducted entirely online, without the use of paper…
Q: Indicate if the following statement is True or False “The basis for building a Pareto is the…
A: A scenario in which resources cannot be transferred to benefit one individual without injuring at…
Q: ENGINEERING ECONOMICS It costs P500,000 at the end of each year to maintain a section of Kennon…
A: Compound interest is also referred to as "interest that is not simple." Compound interest does not…
Q: Prospect Z = ($7 , 0.25 ; $19 , 0.50 ; $26 , 0.25) If Anna's utility of wealth function is given by…
A: Prospect Z = ($7 , 0.25 ; $19 , 0.50 ; $26 , 0.25) and Anna's utility of wealth function is given by…
Q: Kyle is a grade 5 student currently taking his modular class at home since the pandemic happened in…
A: Between 5th and high school its 7 years Amount saved = 500Php twice a month Interest rate (i) =…
Q: Suppose that the market demand for facial mud packs are given as follows: P = 2,200 – Q. Mud packs…
A: Given, Market demand: P = 2200 - Q
Q: Examine the Lorenz Curves for Germany and Singapore shown in Figure 5. Which of the following…
A: The Lorenz curve and Ginni coefficient are the measurements of the inequality in an economy. With…
Q: Quantity In reference to the above graph for an oligopolist. If the above firm at the point E in…
A: The kinked demand curve model explains the price rigidity observed in oligopolistic markets.
Q: oduction Opportunities Hours Needed to Make 1 Unit of Number of Units Produced in 40 Hours Cheese…
A: Production possibilities frontier does the combination of two goods that can be produced with the…
Step by step
Solved in 4 steps
- Which combination maximises excess portfolio expected return per unit of risk? What is the economic interpretation for this combination?Suppose you visit with a financial adviser, and you are considering investing some of your wealth in one of three investment portfolios stocks, bonds, or commodities. Your financial adviser provides you with the following table, which gives the probabilities of possible returns from each investment To maximize your expected return, you should choose: Stocks Bonds Probability Return Probability Return 0.15 20% 0.15 16.7% 06 10% T 04 7.5% 0.25 8% 0.45 3.3% OA bonds OB stocks OC. commodities OD. All of the portfolios have the same expected return. If you are risk-averse and had to choose between the stock or the bond investments, you would choose OA the stock portfolio because there is less uncertainty over the outcome OB. the bond portfolio because there is less uncertainty over the outcome. OC. the stock portfolio because of greater expected return. OD. the bond portfolio because of greater expected return. Commodities Probability Return 02 20% 0.2 15% 0.2 8% 02 02 5% 0%Portfolios A, B, and C all lie on the efficient frontier that allows for risk-free borrowing and lending. Portfolio A and B have the following expected returns and return variances: A: μ_A=0.0925 , σ_A^2=0.0225 ; B: μ_B=0.11 , σ_B^2=0.04. Portfolio C’s return has variance σ_C^2=0.1225. What is the expected return and Sharpe ratio of Portfolio C? What is the risk-free interest rate? Explain your calculations
- Suppose you have just inherited $10,500 and are considering different options for investing the money to maximize your return. If you are risk-neutral (that is, neither seek out or shy away from risk), which of the following options should you choose to maximize your expected return? A. Hold the money in cash and earn zero return. B. Invest the money in a corporate bond, with a stated return of 4%, but there is a chance of 9% the company could go bankrupt. C. Put the money in an interest-bearing checking account, which earns 3%. The FDIC insures the account against bank failure. D. Loan the money to one of your friends' roommates, Mike, at an agreed upon interest rate of 7%, but you believe there is a 5% chance that Mike will leave town without repaying you.Assume the following information about the market and Apple, Inc.s stock. Apple's beta is 0.96, the risk-free rate is 2.18, the market risk premium is 6.35. Using the security market line (SML), what is the expected return for the firm's stock? Enter your response as a regular percent, rounded to the nearest first decimal. Do not enter dollar signs, percent signs, or commas. For example, if you calculated the decimal 0.1093, you would enter for your answer, 10.9. That reads 10.9 percent and is rounded conventionally.Assume that you manage a risky portfolio with an expected return of18% and a standard deviation of 28%. The T-note rate is 2.7%. If your client chooses to invest 75% of a portfolio in your fund and 25% in a T-note bond fund. a. What is the expected return of your client's portfolio? b. What is the standard deviation of your client's prtfolio?
- Stock X has a 9.5% expected return, a beta coefficient of 0.8, and a 30% standard deviation of expected returns. Stock Y has a 12.0% expected return, a beta coefficient of 1.1, and a 30.0% standard deviation. The risk-free rate is 6%, and the market risk premium is 5%. Calculate the required return of a portfolio that has $7,500 invested in Stock X and $5,500 invested in Stock Y. Do not round intermediate calculations. Round your answer to two decimal places. rp = %Consider the following portfolio choice problem. The investor has initial wealth w and utility u(x) = x^n/n . There is a safe asset (such as a US government bond) that has net real return of zero. There is also a risky asset with a random net return that has only two possible returns, R1 with probability 1 − q and R0 with probability q. We assume R1 < 0, R0 > 0. Let A be the amount invested in the risky asset, so that w − A is invested in the safe asset. 1. What are risk preferences of this investor, are they risk-averse, riskneutral or risk-loving? 2. Find A as a function of w. 3. Does the investor put more or less of his portfolio into the risky asset as his wealth increases? 4. Now find the share of wealth, α, invested in the risky asset. How does α change with wealth? 5. Calculate relative risk aversion for this investor. How does relative risk aversion depend on wealth?The following table shows the betas and actual expected returns of 4 mutual funds in the market: ● Fund 1 Fund 2 Fund 3 Fund 4 ● Beta 0.5 0.8 1.4 1.9 Actual expected The return rate of riskfree asset is rf = 5% and the market portfolio exists. You are given that Exactly two of the funds perform better than the market expectation (i.e. Actual expected return is strictly higher than market expected return) Exactly one of the funds performs worse than the market expectation. (a) Which of the funds lie on security market line (SML)? Explain your answer. Hint 1: Try to draw a suitable figure and visualize the problem.) (Hint 2: Which performance indexes will be useful in this context?) return 7.2% 10% 12% 16%
- Define the term Expected return on a risky asset?The Security Market Line (SML) for the United States is shown on the graph below. Suppose that the interest rate for short-term government bonds in Japan is 1.5 percent, and that research shows that investors in the Japanese market tend to be more risk averse than investors in the U.S. market. Instructions: Use the tool provided 'SML, Japan' to draw the Security Market Line for Japan. Plot only the endpoints of the line. Average expected rate of return (%) 8.0 999655544MONNITO S5055OSOSOSOSOSO 7.5 7.0 6.5 6.0 5.5 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 SML USA SML Risk level (beta) JAPAN 0.5 0 0.250.50 0.751.00 1.251.50 1.752.00 SMLJAPAN Tools SML JAPAN BXSuppose there are two independent economic factors, M₁ and M₂. The risk-free rate is 6%, and all stocks have independent firm-specific components with a standard deviation of 54%. Portfolios A and B are both well diversified. Portfolio Beta on M₁ 1.7 1.9 8 Beta on M₂ 2.0 -0.8 Expected Return (%) 33 14 Required: What is the expected return-beta relationship in this economy? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Expected return-beta relationship (fp) 6.00 % + 7.28 Bp1+ 7.31 Bp2