The correct statements about the risk of arbitrage are III and IV.
III- In reality, even if eventually price will go to fundamentals, arbitrageurs maybe forced out of the market because of the risk of margin call.
IV- In reality, if lenders do not dare to lend enough capital to arbitrageurs, then arbitrageurs may not have enough capital to push price back to fundamentals. Price could always be wrong, thus making the arbitrage position not riskless.
Arbitrage is a trading strategy that involves buying and selling the same asset in different markets in order to profit from a difference in price. In theory, arbitrage is riskless because the price difference should eventually disappear. However, in reality, there are a number of factors that can make arbitrage risky.
One of the biggest risks of arbitrage is the risk of margin call. When an arbitrageur buys an asset, they typically borrow money from a broker to finance the purchase.
This is known as margin trading. If the price of the asset falls, the arbitrageur may be required to put up more collateral to cover their losses. If they cannot do this, they will be forced to sell the asset at a loss.
Another risk of arbitrage is the risk of liquidity. If there is not enough liquidity in the market, it may be difficult for the arbitrageur to buy and sell the asset at the desired price. This can lead to losses if the price of the asset moves against the arbitrageur.
Finally, there is always the risk that the price of the asset will not go back to fundamentals. This could happen if there is some new information that causes the market to change its expectations about the asset. If this happens, the arbitrageur will lose money.
For these reasons, arbitrage is not a risk-free strategy. However, it can be a profitable strategy if the arbitrageur is able to identify mispriced assets and take advantage of the difference in price.
To know more about risk of arbitrage, refer here:
https://brainly.com/question/31753918#
#SPJ11
BookLatino’s Plc wants to acquire Book Cellar Plc. Shares in BookLatino’s are currently trading at £5.00 each and shares in Book Cellar are trading at £2.40 each. BookLatino’s is offering 5 of its ordinary shares for ten shares in Book Cellar. What does this imply that BookLatino’s values shares of Book Cellar at?
To determine the implied value that BookLatino's Plc assigns to shares of Book Cellar Plc, we can compare the exchange ratio provided in the acquisition offer.
BookLatino's is offering 5 of its ordinary shares for every 10 shares in Book Cellar.
Based on this exchange ratio, we can calculate the implied value by comparing the market prices of the two companies' shares.
Implied value of Book Cellar shares by BookLatino's = (BookLatino's share price / Exchange ratio)
BookLatino's share price = £5.00
Exchange ratio = 5 BookLatino's shares / 10 Book Cellar shares = 0.5
Implied value of Book Cellar shares by BookLatino's = (£5.00 / 0.5) = £10.00
Therefore, BookLatino's Plc values shares of Book Cellar Plc at £10.00 each based on the exchange ratio in the acquisition offer.
Know more about shares here:
https://brainly.com/question/32328563
#SPJ11
) A manufacturer estimates marginal revenue to be 500q 9-1/2 dollars per unit when the level of production is q units each hour. The corresponding marginal cost has been found to be 0.2q dollars per unit. If the manufacturer's profit is 1000 dollars when the hourly level of production is 49 units, what is the profit when the level of production is 81 units each hour? Profit =
A manufacturer estimates marginal revenue to be 500q 9-1/2 dollars per unit when the level of production is q units each hour, Profit when the level of production is 81 units each hour is 9,200 dollars.
To find the profit, we need to calculate the total revenue and total cost. The total revenue is the product of the marginal revenue and the number of units produced (q), while the total cost is the product of the marginal cost and the number of units produced.
At a production level of 49 units, the total revenue is (500 * 49) + 9-1/2 dollars, and the total cost is (0.2 * 49) dollars. The profit is the difference between the total revenue and total cost, which is (500 * 49) + 9-1/2 - (0.2 * 49) dollars.
Now, let's calculate the profit at a production level of 81 units. The total revenue is (500 * 81) + 9-1/2 dollars, and the total cost is (0.2 * 81) dollars.
By evaluating the expression, we find that the profit at a production level of 81 units each hour is 9,200 dollars.
Learn more about total revenue here: brainly.com/question/25717864
#SPJ11
D Assume you've just received a bonus at work of $3,158. You deposit that money in the bank today, where it will earn interest at a rate of 10% per year. How much money will you have in the account after 8 years? Enter your answer in dollars, rounded to the nearest cent (2 decimals). Question 15 10 pts Assume one year the basket of goods has a price level of $100, and the following year that same basket of goods is priced at $113. What was the rate of inflation over that year? Enter your answer as a percentage, rounded to two decimals, and without the percentage sign ('%'). For example, if your answer is 0.123456, then it is equivalent to 12.35%, so you should enter 12.35 as the answer.
For the first question, we can use the formula for compound interest to find the future value of the deposit. We have P = $3,158 as the principal, r = 0.1 as the annual interest rate, and n = 8 as the number of years.
Plugging these values into the formula FV = P(1 + r)^n, we get FV = $6,497.43. Therefore, the amount of money in the account after 8 years will be $6,497.43.
For the second question, we can use the formula for inflation rate, which is (current price level - previous price level) / previous price level. Plugging in the given values, we get (113 - 100) / 100 = 0.13. Multiplying this by 100 gives us the inflation rate as 13%. Therefore, the inflation rate over that year was 13%.
To know more about compound interest visit:
https://brainly.com/question/14295570
#SPJ11
Which of the following principles reflects the concept of market justice?
A. Individuals are primarily responsible for their own health.
B. Health care is not a right.
C. Health care is most efficiently provided through the private sector.
D. All of these are correct.
The principle that reflects the concept of market justice is A. Individuals are primarily responsible for their own health.
Explanation:
1. Market justice is a concept that emphasizes individual responsibility and free market principles in the provision of health care.
2. Therefore, the principle that reflects this concept is A. Individuals are primarily responsible for their own health.
3. This means that individuals are responsible for maintaining their own health through healthy behaviors, preventative measures, and seeking out health care services when necessary.
4. This principle also suggests that individuals should have the freedom to choose their own health care providers and treatment options based on their own personal preferences and values.
5. In contrast, the principle of social justice emphasizes the importance of providing equitable access to health care services for all individuals, regardless of their ability to pay or personal responsibility for their health.
Know more about the Market justice click here:
https://brainly.com/question/30901563
#SPJ11
a manufacturing firm that is highly sensitive to the economic growth of the national economy is most likely to adopt a ------ dividend policy.
a- constant
b- special
c- one-time
d- residual
e- none of the above
A manufacturing firm that is highly sensitive to the economic growth of the national economy is most likely to adopt a residual dividend policy.
A residual dividend policy is the most suitable option for a manufacturing firm that is highly sensitive to the economic growth of the national economy. In this policy, the company allocates dividends based on the remaining funds available after fulfilling all investment opportunities and maintaining an optimal level of retained earnings. This approach ensures that the firm can adjust its dividend payments according to fluctuations in economic conditions.
By adopting a residual dividend policy, the manufacturing firm can prioritize its capital investment needs and preserve financial flexibility. During periods of economic growth, when the firm's profitability and cash flow are robust, it can allocate a larger portion of earnings towards capital investments to seize growth opportunities. This approach helps the company to maintain a strong financial position and supports its long-term sustainability.
However, during economic downturns or periods of uncertainty, when the firm's earnings and cash flow are affected, the residual dividend policy allows the company to conserve cash and retain earnings for future investments or to weather challenging economic conditions. By adjusting dividend payments based on available funds, the firm can better align its dividend policy with the prevailing economic environment. Overall, a residual dividend policy enables a manufacturing firm to be responsive to changes in the national economy, ensuring the efficient allocation of resources and the ability to adapt to varying economic conditions.
Learn more about residual dividend policy here: https://brainly.com/question/29851120
#SPJ11
9. Which of the following is affected directly from a corporation's loss? A) A bond holder B) A commercial paper holder C) A shareholder D) A T-bill holder
The correct answer to this question is C) A shareholder.
When a corporation incurs a loss, it directly affects the value of its stocks, which are owned by the shareholders. This is because a loss reduces the company's overall profitability and decreases the amount of money available for dividends and reinvestment.
As a result, the stock price may fall, causing a loss for shareholders who choose to sell their shares. Bond holders, commercial paper holders, and T-bill holders, on the other hand, are not directly affected by a corporation's loss.
Bonds and commercial paper are debt securities that pay a fixed rate of interest, regardless of the company's profitability, while T-bills are issued by the government and are not related to corporate profits. In conclusion, shareholders bear the most direct impact of a corporation's loss.
To know more about Profits visit-
brainly.com/question/30507114
#SPJ11
An example of a pure alpha driver is:
A.
equity market long/short hedge funds.
B.
Technology sector funds.
C.
Commodity mutual funds.
D.
130/30 mutual funds.
A pure alpha driver is an investment strategy that seeks to generate returns that are not correlated with the overall market or benchmark index. An example of a pure alpha driver is equity market long/short hedge funds. The correct option is B.
Pure alpha driver it aims to achieve alpha, or excess returns, through skillful security selection and market timing. long/short hedge funds employ a variety of investment techniques such as buying stocks that are expected to increase in value and shorting those that are expected to decrease in value. They aim to generate positive returns regardless of whether the overall market is rising or falling.
Technology sector funds, commodity mutual funds, and 130/30 mutual funds, on the other hand, are not necessarily pure alpha drivers as they may be influenced by market or sector-specific factors. For example, technology sector funds may be impacted by developments in the technology industry, while commodity mutual funds may be influenced by changes in commodity prices. 130/30 mutual funds, meanwhile, use leverage to enhance returns, which can amplify both positive and negative market movements.
Therefore, when looking for a pure alpha driver, equity market long/short hedge funds are a good example of an investment strategy that aims to generate returns through skillful security selection and market timing. The correct option is B.
Know more about the pure alpha driver
https://brainly.com/question/30452598
#SPJ11
Read the following article https://www.cbc.ca/news/canada/british Columbia/bc-craft-beer- growing-market-asia-1.4795287 and explain whether it relates to a microeconomic issue or a macroeconomic issue. In your answer explain the difference between the two and provide justification of why you believe that it either relates to microeconomics or macroeconomics
The article on the growing market for British Columbia craft beer in Asia relates to a macroeconomic issue as it analyzes international trade patterns and the impact of globalization on the craft beer industry.
Microeconomics focuses on individual economic agents such as consumers, households, and firms, examining their behavior, choices, and interactions in specific markets. Macroeconomics, on the other hand, deals with the overall behavior and performance of the economy as a whole, including topics such as national income, unemployment, inflation, and international trade.
The article discusses the expansion of the British Columbia craft beer industry into the Asian market, highlighting the macroeconomic implications of this trend. It examines the factors affecting the growth of this industry, such as changing consumer preferences, trade policies, and the potential economic benefits for the region. These factors go beyond the scope of individual market transactions and involve broader economic phenomena and policies, making it a macroeconomic issue.
Learn more about Microeconomics here:
https://brainly.com/question/28489802
#SPJ11
Determine the minimum average duration of assets a bank needs if it wants to tolerate a duration gap not lower than – 1.2 years, assuming the average duration of liabilities is 3.5 years, assets are currently valued at $100 million and liabilities are $90 million.
The minimum average duration of assets a bank needs if it wants to tolerate a duration gap not lower than – 1.2 years is 2.3 years.
The duration gap is the difference between the average duration of assets and the average duration of liabilities. A negative duration gap means that the value of the bank's assets will fall by more than the value of its liabilities if interest rates rise. This is because the bank's assets are more sensitive to interest rate changes than its liabilities. The bank wants to maintain a duration gap of at least – 1.2 years. This means that the value of its assets should fall by at least 1.2 years if interest rates rise. If the value of the assets falls by more than 1.2 years, the bank will lose money.
The average duration of liabilities is 3.5 years. Therefore, the average duration of assets needs to be 2.3 years. This is because 2.3 years is the amount by which the value of the assets needs to fall in order to offset the 1.2 year fall in the value of the liabilities.
To know more about average duration of assets, click here:-
https://brainly.com/question/29974796
#SPJ11
a firm evaluates all of its projects by applying the irr rule. year cash flow 0 –$ 164,000 1 52,000 2 87,000 3 71,000 what is the project's irr?
The project's IRR is approximately 13.43%.
What is the project's IRR?To calculate the project's internal rate of return (IRR), we need to find the discount rate that makes the net present value (NPV) of the cash flows equal to zero. In this case, the cash flows are as follows:
Year 0: -164,000
Year 1: 52,000
Year 2: 87,000
Year 3: 71,000
Using a financial calculator or software, we can input these cash flows and find the IRR. The IRR for this project is approximately 13.43%.
Learn more about approximately
brainly.com/question/31695967
#SPJ11
The project's internal rate of return (IRR) is approximately 18.1%.
What is the internal rate of return IRR for the firm's evaluated projects?Internal Rate of Return (IRR) is a widely used method for evaluating the profitability of an investment project. It represents the discount rate at which the net present value (NPV) of the project's cash flows becomes zero.
In this case, we have four periods of cash flows:
an initial outflow of -$164,000 and subsequent inflows of $52,000, $87,000, and $71,000 in years 1, 2, and 3 respectively.
To calculate the IRR, we find the discount rate that equates the present value of these cash flows to the initial investment.
By applying the appropriate calculations, we determine that the project's IRR is approximately 18.1%.
Learn more about Internal Rate of Return
brainly.com/question/31870995
#SPJ11
primary considerations in scheduling high-volume systems involve
(I) assigning workers to work centers (II) overcoming the disruptions to planned outputs (III) coordinating the flow of inputs O I and III O I and II
O II and III O I, II, and III O ll only
The primary considerations in scheduling high-volume systems involve all three of the options presented in the question: assigning workers to work centres (I), overcoming disruptions to planned outputs (II), and coordinating the flow of inputs (III).
Firstly, assigning workers to work centres is crucial to ensure that the appropriate skills and resources are utilized in each area of production. This involves considering factors such as the availability of workers, their skill sets, and the nature of the work to be completed at each work centre.
Secondly, overcoming disruptions to planned outputs is important to maintain a smooth and consistent workflow. This may involve adjusting schedules and workloads to account for unforeseen issues such as equipment breakdowns, supply chain disruptions, or employee absences. Effective communication and problem-solving skills are essential to minimize the impact of such disruptions on overall productivity.
Finally, coordinating the flow of inputs is critical to ensure that materials and resources are delivered to the right place at the right time. This includes managing inventory levels, tracking supplier lead times, and optimizing transportation logistics. By streamlining the flow of inputs, high-volume systems can minimize the risk of delays or bottlenecks that could impact production schedules and output levels.
To know more about High-Volume Systems visit:
https://brainly.com/question/30257874
#SPJ11
Which of the following is information as opposed to data? A. a list of concerts B. a course registration book C. a column of figures D. a scantron sheet with multiple choice answers and the word "key" filled in
A. A list of concerts. Among the given options, a list of concerts can be considered as information rather than raw data.
While data refers to individual facts or observations, information is the result of organizing, analyzing, and interpreting data to make it meaningful and useful. A list of concerts provides organized and structured data that conveys specific details about upcoming musical events, such as the names of artists, dates, venues, and ticket prices. Similarly, a column of figures alone does not provide any context or interpretation, making it raw data rather than information. A scantron sheet with multiple-choice answers and the word "key" filled in is also a form of data since it contains responses that need to be processed and interpreted to extract meaningful information, such as test scores or correct answers.
To learn more about concerts, Click here:
https://brainly.com/question/13345755
#SPJ11
A firm considers to buy a new 3D printer whose cost is $ 46 100. The cost of 3D printer will be paid in 2022. The expected cash flows of this investment are as follows: 2023: $ 13 200 2024: $ 13 200 2025: $ 13 200 2026: $13 200 2027: $13 200 a) Find the Internal Rate of Return (IRR) of this project. b) Given that the current annual interest rate is 15% and the risk premium appropriate for this investment is 5%; should the firm accept or reject this investment Note: If you do not have access to a sophisticated calculator or Excel which you need to provide a numerical answer: write the relevant formula for IRR. If your formula is correct; you receive full grade for question 4a. Write the decision criteria according to which we accept or reject an investment on basis of IRR (e.g write something like asb specifying what a is and what b is) to get full credit for 4b in case you are unable to calculate the IRR.
With an annual interest rate of 15% and a risk premium of 5%, the required rate of return is 20%. Therefore, if the calculated IRR is greater than 20%, the firm should accept the investment; otherwise, it should be rejected.
To find the Internal Rate of Return (IRR) of the investment in the new 3D printer, we need to calculate the discount rate that equates the present value of the expected cash flows to the initial cost of the printer. Since you mentioned not having access to a calculator or Excel, I will provide you with the formula to calculate the IRR:
IRR = Initial Cost / Sum of (Cash Flows / [tex](1 + r)^t[/tex])
Where:
The initial Cost is the cost of the 3D printer ($46,100).
Cash Flows are the expected cash flows in each period ($13,200 for each year from 2023 to 2027).
r is the discount rate, which is the unknown we want to find.
t is the time period.
To calculate the IRR using this formula, you would need to iterate and solve for r using trial and error, trying different discount rates until you find the rate that makes the equation hold true.
Regarding the decision criteria for accepting or rejecting the investment based on the IRR, typically, if the IRR is greater than the required rate of return (which consists of the annual interest rate plus the risk premium), the investment is considered acceptable. If the IRR is lower than the required rate of return, the investment is typically rejected.
In this case, with an annual interest rate of 15% and a risk premium of 5%, the required rate of return would be 20%. Therefore, if the calculated IRR is greater than 20%, the firm should accept the investment. If the IRR is lower than 20%, the investment should be rejected.
To learn more about annual interest rates
https://brainly.com/question/17403689
#SPJ4
which of the following shows the correct calculation of the ending balance of pension plan assets?
To calculate the ending balance of pension plan assets, you need to subtract the beginning balance of assets from the total contributions and investment gains, and then add any expenses or losses.
The formula for this calculation is:
Ending balance of assets = Beginning balance of assets + Contributions and investment gains - Expenses and losses
It's important to regularly monitor the ending balance of pension plan assets to ensure that the pension plan remains financially stable and able to meet its obligations to retirees.
The correct calculation of the ending balance of pension plan assets can be determined using the following formula: Ending Balance = (Beginning Balance + Contributions + Investment Returns) - Benefit Payments In this calculation, the beginning balance represents the starting pension plan assets, contributions are the amounts added to the plan, investment returns are the earnings on the assets, and benefit payments are the amounts paid out to retirees during the period.
To know more about assets, visit:
https://brainly.com/question/14826727
#SPJ11
In a year in which corporate bonds offered an average return of 9%, treasury bonds offered an average return of 7%, common stocks offered an average return of 20% and Treasury bills offered 3%. The market risk premium was: %. What would be the price of a stock that pays an annual fixed dividend of $1.2 for ten years, and then the dividend payment increases by 1% every year, and the required rate of return is 5% annually?
The price of a stock that pays an annual fixed dividend of $1.2 for ten years, then the dividend payment increases by 1% every year, and the required rate of return is 5% annually is $28.97.
Given that, Corporate bonds offered an average return = 9%Treasury bonds offered an average return = 7%Common stocks offered an average return = 20%Treasury bills offered an average return = 3%The market risk premium was = ?Price of a stock that pays an annual fixed dividend of $1.2 for ten years, and then the dividend payment increases by 1% every year is =? The required rate of return is 5% annually. The formula for calculating the market risk premium can be given as; Market Risk Premium = Expected Rate of Return - Risk-Free Rate of ReturnThe expected rate of return of corporate bonds is 9%, and the risk-free rate of return on Treasury bills is 3%.
Therefore, Market Risk Premium = 9 - 3 = 6%The price of a stock that pays an annual fixed dividend of $1.2 for ten years and then increases by 1% every year can be calculated using the dividend discount model. The formula for the price of a stock can be given as follows; P₀ = D₁ / (r - g)Where D₁ = the dividend at the end of year oneP₀ = the current stock price = the growth rate of the dividends = the required rate of return on the stock. Substituting the given values, we get, P₀ = 1.2 (1.01¹⁰) / (0.05 - 0.01) = $28.97Therefore, the price of a stock that pays an annual fixed dividend of $1.2 for ten years, then the dividend payment increases by 1% every year, and the required rate of return is 5% annually is $28.97.
Learn more about bonds
https://brainly.com/question/25965295
#SPJ11
Poor environmental management has contributed immensely to high poverty levels in many developing countries. However, extreme poverty has also been cited as a major cause of poor environmental management. Critically discuss.
High poverty levels in many developing countries are closely intertwined with poor environmental management. There is a complex relationship between the two, where each exacerbates the other.
The link between poor environmental management and high poverty levels is evident in several ways. Firstly, environmental degradation, such as deforestation, pollution, and depletion of natural resources, directly affects the livelihoods of the poor who depend heavily on these resources for survival.
Moreover, inadequate waste management and pollution can have detrimental effects on public health, imposing additional financial burdens on impoverished communities.
Addressing the interplay between poverty and environmental management requires a comprehensive approach that addresses both issues simultaneously. Poverty alleviation programs should integrate sustainable development practices, promoting access to clean energy, improving natural resource management, and supporting environmentally friendly livelihood options.
Similarly, environmental conservation efforts must prioritize the inclusion of vulnerable communities, ensuring equitable access to resources and opportunities. By breaking the cycle of poverty and environmental degradation, we can foster a more sustainable and equitable future.
Learn more about Poverty alleviation here:
https://brainly.com/question/28522199
#SPJ11
4. Which of the following statements about the beta coefficient is not true?
A. A beta of > 1 implies that the stock's volatility is greater than that of the market
B. A beta of > O implies that the stock tends to move against the market
C. A beta of 1 implies a volatility equal to that of the market
D. The higher the beta, the higher the market risk
The statement that is not true is (B) "A beta of > 0 implies that the stock tends to move against the market." The correct answer is option (B).
In finance, the beta coefficient measures the systematic risk or volatility of a stock relative to the overall market. The interpretation of beta is as follows:
A. A beta of > 1 implies that the stock's volatility is greater than that of the market. This means that the stock is expected to have more significant price fluctuations compared to the market.
B. A beta of > 0 implies that the stock moves in the same direction as the market. It means that the stock tends to move in the same direction as the overall market, but the magnitude of its movements may differ.
C. A beta of 1 implies a volatility equal to that of the market. The stock is expected to have price fluctuations in line with the overall market.
D. The higher the beta, the higher the market risk. A higher beta indicates that the stock is more sensitive to market movements and therefore carries a higher level of market risk.
So, the correct statement is that a beta of > 0 implies that the stock moves in the same direction as the market, rather than against it. Hence option (B) is the correct answer.
To know more about stock click here
brainly.com/question/14649952
#SPJ11
Consider the UK with only the automotive sector, characterised by increasing returns to scale, where homogeneous firms produce varieties of a differentiated good and operate under monopolistic compe- tition. Preferences feature a constant elasticity of substitution between varieties which is higher than one. Assume that they can freely trade with France, which shares the same technology, preferences and size (ZFR = LUK). Suppose migration from the UK to a third non-trading country reduces its population by 5%. Then, (a) welfare falls in both countries, although France loses more than the UK (b) welfare equally falls by less than 2.5% in both countries (c) welfare increases in both countries, although the UK gains more than France (d) none of the above
The UK automotive sector operates under monopolistic competition with increasing returns to scale. Both the UK and France have the same technology, preferences, and size (ZFR = LUK). Additionally, migration to a non-trading country reduces the UK's population by 5%.
The correct statement is: (d) none of the above.
Given the information provided, we cannot determine the specific welfare effects of migration from the UK to a third non-trading country on both the UK and France. The statement does not provide enough information about the specific impact of migration on welfare in each country.
The effects of migration on welfare depend on various factors such as the specific economic conditions, labor market dynamics, and the magnitude of the migration flow. Without additional information, we cannot make definitive conclusions about the welfare effects in this scenario.
To know more about migration click this link -
brainly.com/question/17991559
#SPJ11
female leaders tend to use transformational leadership more than male leaders do. T/F
True. Research has shown that female leaders tend to use transformational leadership more than their male counterparts. Transformational leadership is a style that emphasizes on inspiring and motivating followers to work towards a common goal and achieve their full potential. This leadership approach involves building relationships, communicating a compelling vision, and creating a sense of trust and respect among followers.
Studies have found that female leaders tend to be more empathetic, collaborative, and participative in their leadership style, which aligns with the principles of transformational leadership. However, it is important to note that gender should not be the sole determinant of leadership style as individuals may exhibit different leadership styles depending on various factors such as organizational culture and personal values.
To know more about transformational leadership visit :-
https://brainly.com/question/28784209
#SPJ11
if a mature company pays an annual dividend of $5, has an expected return of 14%, it’s stock is currently trading at a price of $80/share , what does this indicate the market is expecting to be the company’s long term dividend growth rate?
A stock's intrinsic value can be calculated using the Gordon Growth Model, sometimes referred to as the Gordon Dividend Model or the dividend discount model (DDM). The market is expecting the company's long-term dividend growth rate to be approximately 7.29%.
The formula is:
Expected stock price = (Dividend * (1 + g)) / (Expected return - g)
Where:
- Expected stock price = $80/share
- Dividend = $5
- Expected return = 14% (0.14)
- g = long-term dividend growth rate
Plugging the values into the formula:
$80 = ($5 * (1 + g)) / (0.14 - g)
To solve for the growth rate 'g', we can use algebra:
$80 * (0.14 - g) = $5 * (1 + g)
11.2 - 80g = 5 + 5g
5g + 80g = 11.2 - 5
85g = 6.2
g ≈ 0.0729
So, the market is expecting the company's long-term dividend growth rate to be approximately 7.29%.
To know more about the Gordon Growth Model visit:
https://brainly.com/question/28861455
#SPJ11
true or false? explain
Statement: If an investment strategy of "long carbon-efficient firms and short carboninefficient firms" generates positive abnormal returns, this is consistent with the carbon alpha hypothesis.
The statement is not necessarily consistent with the carbon alpha hypothesis. The carbon alpha hypothesis suggests that investment strategies focusing on carbon-efficient firms should generate positive abnormal returns. So, the given statement is False. ,
However, the given statement introduces an additional element of shorting carbon-inefficient firms. The combination of long positions in carbon-efficient firms and short positions in carbon-inefficient firms may generate positive abnormal returns, but this outcome does not directly confirm the carbon alpha hypothesis.
The carbon alpha hypothesis specifically focuses on the positive abnormal returns generated from investing in carbon-efficient firms, indicating that these firms outperform the market due to their environmental sustainability practices. It does not address the performance of short positions in carbon-inefficient firms. Therefore, while the given investment strategy could potentially yield positive abnormal returns, it cannot be used as direct evidence to support or confirm the carbon alpha hypothesis. The hypothesis is based on the notion that carbon-efficient firms will outperform the market, irrespective of any short positions in carbon-inefficient firms.
Learn more about positive abnormal returns
https://brainly.com/question/31734017
#SPJ11
Concord Limited has bonds outstanding that will mature in 7 years. The bonds have a face value of $1,000. The bonds pay interest semi-annually and have a coupon rate of 4.7 percent. If the bonds are currently selling at $898.65, what is the yield to maturity that an investor who buys them today can expect to earn? (Round answer to 1 decimal place, e.g. 5.2%.) Yield to maturity 6.00 % What is the effective annual yield? (Round answer to 2 decimal places, e.g. 5.27%.) Effective annual yield 6.09 % eTextbook and Media
The effective annual yield is 6.09%.
To calculate the yield to maturity (YTM) and effective annual yield (EAY) of the Concord Limited bonds, follow these steps: 1. Identify the bond details: - Face value: $1,000 - Coupon rate: 4.7% - Maturity: 7 years - Current price: $898.65 2. The YTM is already provided as 6.00%. 3. To find the EAY, use the following formula: EAY = (1 + YTM/n)^(n) - 1 - YTM = 0.06 (convert 6% to decimal) - n = 2 (semi-annual payments) 4. Plug the values into the formula: EAY = (1 + 0.06/2)^(2) - 1 5. Calculate the EAY: EAY = (1.03)^2 - 1 EAY ≈ 0.0609 6. Convert the EAY back to a percentage and round to two decimal places: EAY = 6.09%
In summary, the yield to maturity for the Concord Limited bonds is 6.0%, and the effective annual yield is 6.09%.
To know more about Effective Annual Yield visit-
https://brainly.com/question/30589557
#SPJ11
This section consists of NINE (9) multiple-choice questions. Each question is worth one (1) mark except for question 7 as it accounts for two (2) marks. Read the below case study and indicate which of the answer options provided is the correct answer.
Financial management is mainly concerned with:
Efficient management of every activity of business
Arrangement of funds required to the firm
Obtaining required funds in the appropriate mix and utilising them, efficiently
Profit maximization.
Financial decisions involve:
Investment, sales and dividend decisions
Finance, Working Capital and dividend decisions
Finance, Dividends and cash decisions
Working Capital, Finance and Capital budgeting.
Financial management helps in:
Short-term planning of company’s activities
Estimating the total funds’ requirement and their proper utilisation in fixed assets and working capital
Profit planning of the firm
Purchase new assets.
It is often that a conflict of interest between the corporate shareholders and the corporate managers may ensure as a result of conflicting decisions.
Which of the following terms describes the conflicting of decisions specified above?
corporate governance
agency problem
Transparency
legal liability.
Which of the following represent the major financial management decisions?
financing and investment
investment, financing, and asset management
financing and dividend
capital budgeting, cash management, and credit management.
Shareholder wealth in a firm is represented by:
the number of people employed in the firm.
The book value of the firm's assets is less than the book value of its liabilities.
The amount of salary paid to its employees.
the market price per share of the firm's common stock.
A would-be an example of a principal, while a would be an example of an agent.
Owner; board director
shareholder; owner
owner; manager
shareholder; bondholder.
A company's is (are) potentially the most effective instrument of good corporate governance.
Managers
auditors
board of directors
CEO.
The financial managers should primarily focus on the interests of .............
Shareholders.
Stakeholders.
Board of directors.
The vice president of finance.
The correct answers to the multiple-choice questions are as follows:
c. Obtaining required funds in the appropriate mix and utilizing them efficiently.
b. Finance, Working Capital, and dividend decisions.
b. Estimating the total funds' requirement and their proper utilization in fixed assets and working capital.
b. Agency problem.
a. Financing and investment.
d. The market price per share of the firm's common stock.
c. owner; manager.
c. board of directors.
a. Shareholders.
Learn more about shareholders: https://brainly.com/question/28452798
#SPJ11
ABC Ltd is a profitable listing company, ABC's senior management decided to issue new debt in order to retire common stocks. What will be the impact on ABC's financial status?s)
The decision of ABC Ltd to issue new debt in order to retire common stocks will have several impacts on its financial status. These impacts can be observed in various aspects:
1. Capital Structure: The issuance of new debt will result in a change in the capital structure of ABC Ltd. The proportion of debt in the company's capital structure will increase, while the proportion of equity (common stocks) will decrease. This will affect the company's leverage ratio and financial risk profile.
2. Interest Expense: As ABC Ltd takes on new debt, it will incur interest expenses on the borrowed amount. This will increase the company's interest obligations, which will have an impact on its profitability and cash flow. The interest payments need to be factored into the company's financial projections and budgeting.
3. Debt Servicing: With the issuance of new debt, ABC Ltd will have to allocate a portion of its cash flow to service the debt. This includes making regular interest payments and eventually repaying the principal amount. The company's ability to meet its debt obligations will depend on its cash flow generation and financial stability.
4. Shareholder Returns: By retiring common stocks through the issuance of new debt, ABC Ltd may affect its shareholders. Shareholders who held the common stocks that are retired will no longer have ownership in the company. The impact on shareholder returns will depend on the terms of the debt issuance and the company's future financial performance.
5. Financial Flexibility: Increasing the amount of debt on the company's balance sheet may limit its financial flexibility. Higher debt levels can result in increased financial obligations and potential constraints on the company's ability to undertake future investments, acquisitions, or other strategic initiatives.
It is important for ABC Ltd's senior management to carefully evaluate the potential impact of issuing new debt on the company's financial status. They should consider factors such as interest rates, debt terms, cash flow projections, and the company's overall financial health to ensure that the decision aligns with the company's long-term financial objectives and maximizes shareholder value.
Additionally, engaging in appropriate risk management strategies and maintaining a prudent capital structure will be crucial in mitigating any potential negative consequences.
Visit here to learn more about debt brainly.com/question/31792485
#SPJ11
Maturity (Years) Yield to Maturity
1 2.00%
2 2.75%
3 3.00%
What will be the yield to maturity on one year zero-coupon bonds next year
What is the yield to maturity on a two-year zero coupon bonds one year from now.
The yield to maturity on the two-year zero-coupon bond one year from now would still be 2.75%.
To determine the yield to maturity on one-year zero-coupon bonds next year, we can look at the current yield curve provided. Since the yield to maturity for a one-year bond is not explicitly given, use the yield for the closest maturity, which is two years at 2.75%. However, we need to consider that the yield curve is upward sloping, indicating increasing yields with longer maturities.
Therefore, we can expect the yield on one-year zero-coupon bonds next year to be slightly higher than 2.75%, but we cannot determine the exact value based on the given information.
To calculate the yield to maturity on a two-year zero-coupon bond one year from now, we can look at the current yield curve. According to the provided data, the yield to maturity for a two-year bond is 2.75%. Since we are looking for the yield one year from now, we need to consider that the bond will have one year remaining to maturity.
Therefore, the yield to maturity on the two-year zero-coupon bond one year from now would still be 2.75%.
Learn more about maturity here:
https://brainly.com/question/2456712
#SPJ11
Which of the following is an example of own-price elasticity?
The change in quantity of canoes demanded when the price of kayaks changed
The change in demand for inferior goods after a series of lay-offs in a small town
The change in quantity demanded after the price of a 32" television decreased by $70
The change in quantity of steaks purchased after the price of seafood increased at a local market
The example of own-price elasticity among the given options is "The change in quantity demanded after the price of a 32" television decreased by $70."
Own-price elasticity measures the responsiveness of quantity demanded to changes in the price of the same product. It quantifies how sensitive consumers are to price changes and helps determine whether a product is elastic (responsive to price changes) or inelastic (less responsive to price changes). In this case, the decrease in price of the 32" television resulted in a change in the quantity demanded, indicating the presence of own-price elasticity.
Own-price elasticity measures the percentage change in quantity demanded divided by the percentage change in price. A positive own-price elasticity value greater than 1 indicates elastic demand, meaning that consumers are highly responsive to price changes, and a decrease in price leads to a proportionately larger increase in quantity demanded. Conversely, a positive but less than 1 own-price elasticity value indicates inelastic demand, implying that consumers are less responsive to price changes, and a decrease in price results in a proportionately smaller increase in quantity demanded.
In the given example, the decrease in the price of the 32" television by $70 led to a change in the quantity demanded. To determine the exact own-price elasticity value, the percentage change in quantity demanded needs to be divided by the percentage change in price. However, without specific numerical data, we cannot provide a precise value for the own-price elasticity in this scenario. Nonetheless, based on the information given, we can infer that the change in quantity demanded after the price decrease indicates the presence of own-price elasticity.
Learn more about Change:
brainly.com/question/28661591
#SPJ11
Misra Inc. forecasts a free cash flow of $20 million in Year 3, i.e., at t = 3, and it expects FCF to grow at a constant rate of 5.5% thereafter. If the weighted average cost of capital (WACC) is 10.0% and the cost of equity is 15.0%, then what is the horizon, or continuing, value in millions at t = 3?
The horizon, or continuing, value at t = 3 for Misra Inc. is approximately $468.8889 million.
The horizon, or continuing, value represents the value of all future free cash flows beyond the explicit forecast period. To calculate the horizon value at t = 3, we can use the Gordon Growth Model: Horizon Value = Year 3 Free Cash Flow * (1 + Growth Rate) / (WACC - Growth Rate)
Given: Year 3 Free Cash Flow = $20 million, Growth Rate = 5.5%, WACC = 10.0%, Horizon Value = $20 million * (1 + 5.5%) / (10.0% - 5.5%)
Calculating the values within parentheses: Horizon Value = $20 million * 1.055 / 0.045
Simplifying the equation further: Horizon Value = $20 million * 23.4444...
Horizon Value ≈ $468.8889 million
Therefore, the horizon, or continuing, value at t = 3 for Misra Inc. is approximately $468.8889 million.
Know more about Gordon Growth Model here
https://brainly.com/question/30355598#
#SPJ11
The company will sell 60,000 units of product-each having a unit variable cost of $22—at a price that will enable the product to absorb $600,000 of fixed cost. What minimum unit sales price must be charged to break even?
The company who sells 60,000 units of product-each having a unit variable cost of $22, the minimum unit sales price that must be charged to break even is $32 per unit.
To break even, the company needs to sell enough units to cover their fixed costs of $600,000 and their unit variable costs of $22 per unit. Using this information, we can calculate the minimum unit sales price that must be charged to break even.
First, we need to calculate the total variable cost for the 60,000 units: 60,000 x $22 = $1,320,000.
Next, we can add the fixed cost of $600,000 to the total variable cost to get the total cost: $1,320,000 + $600,000 = $1,920,000.
To break even, the company must generate enough revenue to cover the total cost of $1,920,000. Dividing the total cost by the number of units sold gives us the minimum unit sales price required to break even: $1,920,000 ÷ 60,000 = $32.
Therefore, the minimum unit sales price that must be charged to break even is $32 per unit.
To know more about break even refer here:
https://brainly.com/question/31134552#
#SPJ11
Gillard and Rudd have formed a partnership. They agree that after paying themselves salaries of $23,000 to Gillard and $30,000 to Rudd, any remaining profit or loss, of the month, would be split 25% to Gillard and 75% to Rudd. If the business generates a profit of +$35,000 for the month, the distribution of profit will be: Select one: a. Gillard -$8,210 Rudd +$43,210 O b. Gillard +$8,750 Rudd +$26,250 c. Gillard +$18,500 Rudd +$16,500 O d. Gillard +$15,189 Rudd +$19,811
The distribution of profit in this scenario can be calculated by subtracting the salaries of Gillard and Rudd from the total profit and then splitting the remaining amount according to their agreed percentage.
So, if the profit for the month is +$35,000, we can subtract the salaries of $23,000 and $30,000 respectively, which leaves us with $35,000 - $23,000 - $30,000 = $-18,000. This means that the business has incurred a loss for the month.
However, since the agreement states that any remaining profit or loss should be split 25% to Gillard and 75% to Rudd, we need to calculate these amounts based on the loss of $18,000.
For Gillard, the amount would be 25% of $-18,000, which is -$4,500. For Rudd, the amount would be 75% of $-18,000, which is -$13,500.
Adding these amounts to their respective salaries, we get Gillard +$18,500 and Rudd +$16,500. Therefore, the correct answer is option C: Gillard +$18,500 and Rudd +$16,500.
know more about net profit.
https://brainly.com/question/14932372
#SPJ11
Graphically illustrate and explain the effects of an increase in population growth on the Solow growth model. In your answer, you must clearly label all curves and the initial and final equilibria. In your answer, explain what happens to the rate of growth of output per worker and the rate of growth of output as the economy adjusts to this increase in population growth
An increase in population growth in the Solow growth model leads to a lower rate of growth of output per worker.
In the Solow growth model, an increase in population growth affects the equilibrium level of output per worker and the rate of growth of output. Initially, the economy is in a long-run equilibrium where the per-worker production function intersects with the savings and investment curve. This represents the level of output per worker and capital per worker that maximizes steady-state output.
When there is an increase in population growth, the labor force expands, shifting the labor supply curve to the right. This shift leads to a decrease in the level of output per worker. As the labor force grows faster than the capital stock, the capital-to-labor ratio decreases, resulting in lower productivity and output per worker. The decrease in output per worker represents a lower rate of growth of output per worker as compared to the initial equilibrium.
The adjustment to the increase in population growth leads to a new long-run equilibrium with a lower level of output per worker but a higher overall level of total output due to the larger labor force. While the rate of growth of output per worker declines, the total output of the economy increases as a result of the increased labor input. Therefore, the rate of growth of total output may not change significantly even though the rate of growth of output per worker decreases.
To learn more about economy, Click here: brainly.com/question/18461883
#SPJ11
