A regression analysis between sales (Y) and advertising (X) (both in dollars) resulted in the following equation: Y=200+12000X The above equation implies that

Q: What is the maturity value for a discount note of $7,000, 120-day, with a discount rate of 6%?

A: Note discount is the difference between the face value (or principal amount) of a promissory note…

Q: A company paid dividends of 12 cents per share this year. For the next five years, the company…

A: The dividend discount model (DDM), a mathematical technique for predicting the price of a company's…

Q: You are considering investing in Ford Motor Company. Which of the following are examples of…

A: Diversifiable risk is that risk which firm specific and its impact only the price of the particular…

Q: Problem 3: Compute the equivalent rate of (A+B+C+D+E) % compounded semi-annually to a rate…

A: A=1 B=5 C=7 D=6 E=8  Therefore (A+B+C+D+E)%=(1+5+7+6+8)% = 27% compounded semi-annually.

Q: Paula and Jim recently applied for life insurance with Shirley, a life insurance agent. For years,…

A: When completing a life insurance application, applicants are required to answer a series of…

Q: The average annual cost of damages caused by floods to a certain subdivision located along Pasig…

A: Present value refers to the money received today being more valuable than the money will receive in…

Q: What is the present value of $4,000 that you expect to receive in two years assuming a discount rate…

A: To calculate the present value we will use the below formula   Present value = FV/(1+r)t Where FV -…

Q: You have been promoted to head of Treasury and Investment Management at Ecobank and have been handed…

A: Ecobank loses ¢5 million in this transaction. This is because they sold the T-Bill for ¢495 million…

Q: A young professional wishes to have $820000 in her retirement account. Its current value is $36000.…

A: This question can be solved using the Goal seek function of What if Analysis.  Let the number of…

Q: Impossible Corporation just paid a dividend of $2.10 per share. The dividends are expected to grow…

A: In the given case, we have provided the last paid dividend per share , the growth rate for the next…

Q: As of 2015, farms were taxed at 10 percent for income up to $46,000; at 24 percent for income…

A: Tax is computed at a certain rate on different slabs of income . In a progressive tax system, the…

Q: EE printing is in the evaluation process for the acquisition of a new computer system. The total…

A: Payback period is a financial metric used to evaluate the length of time it takes to recoup the…

Q: You hold a 9 year bond that is callable in 6 years. The call premium is one semi-annual coupon…

A: Yield to call refers to the rate of return received by the bond holder when the security is held up…

Q: Assume Coleco pays an annual dividend of $1.75 and has a share price of $35.00. It announces that…

A: The current dividend yield is a financial metric that measures the current annual dividend payment…

Q: As the assistant to the CFO of Johnstone Inc., you must estimate its cost of common equity. You have…

A: When companies earn profits from their financial operations, they distributed part of their profits…

Q: f the face value of both the shres is same then which investment out of following. is more…

A: To determine which investment is more profitable, we need to calculate the dividend yield for each…

Q: A 3-month zero-coupon bond is selling for $99.5 and a 10-year zero-coupon bond is selling for $64.3.…

A: Data given: Selling price for 3-month Zero coupon bond=$99.5 Selling price for 10-year Zero coupon…

Q: What is the lower bound for the price of a 7-month European call option on a non-dividend-paying…

A: A call option gives the right but not the obligation to buy at the strike price. The lower bound of…

Q: 1.1. Find the annuity and interest Periodic Deposit- $2000 at the end of every three months…

A: Two different unrelated problems appear on the screen. Though they are different otherwise, the…

Q: 1) Consider the following assets E(r) Asset A 0.2 B C 0.1 0.15 A B C 0 0.12 0.07 0.1 If the…

A:

Q: Problem 2: A man deposited ABCDE.00 in a bank of 1D. E% per annum from January 10, 1999 to November…

A: To find the exact simple interest earned on a deposit of ABCDE.00 at 1D.E% per annum from January…

Q: Your boss hands you the following information about two mutually exclusive projects. She adds the…

A: NPV is calculated as the present value of cash inflows minus initial investment. IRR is the discount…

Q: Matheson Electronics has just developed a new electronic device that it believes will have broad…

A: Net Present Value: It represents the profit generated by the firm in absolute terms after…

Q: What does it take to become a personal financial advisor?

A: Personal financial advisor-They provide guidance to individuals on matters relating to personal…

Q: Financial Accounting Borrowing oneself Into Financial Health? A condensed balance sheet for CSV…

A: Current ratio: It compares the company's current assets to its current liabilities. Current assets…

Q: One year ago, you purchased a stock at a price of $57.81 per share. Today, you sold your stock at a…

A: The dividends paid by a company refer to the profits that the company disburses to its shareholders…

Q: Problem #2: You have taken a loan of $244,000. You can afford to pay monthly payments of $1921.13.…

A: When we take a loan we make a fixed periodic payment against that loan. This fixed periodic payments…

Q: Suppose that you have $1 million and the following two opportunities from which to construct a…

A: Expected rate of return  of Portfolio: The total return that the investor anticipates under various…

Q: Consider a borrow-and-invest strategy in which you use $1 million of your own money and borrow…

A: The borrow and invest strategy involves borrowing funds, typically through loans or credit cards,…

Q: Steven purchased 1000 shares of a certain stock for $25,700 (including commissions). He sold the…

A: Purchase Amount = p = $25,700 Time = t = 2 years Selling Amount = s = $33,400

Q: Sandra Waterman purchased a 52-week, $4,000 T-bill issued by the U.S. Treasury. The purchase price…

A: The current bond yield refers to the rate of return on a bond that an investor would receive if they…

Q: Question: 1) You are expected and required to comment/analyze specifically the following aspects on…

A: Note: This post has two questions. The second calls for research on industry data; hence it has not…

Q: An investor plans to save 45 years for his retirement with $500 monthly deposits. He plans to live…

A: Savings period = 45 years  Periodic savings, P = $500  Interest rate = 9%  Number of monthly…

Q: A $1,000 bond originally issued at par maturing in exactly ten years bears a coupon rate of 8%…

A: Yield To Maturity: It represents the expected rate of return on the bond for the bondholders…

Q: Vigour Pharmaceuticals Ltd. is considering investing in a new production line for its pain-reliever…

A: Initial cost includes the cost of equipment, installation cost and increase in net working capital.…

Q: Consider the following information:       Rate of Return if State Occurs State of Probability of…

A: Step 1 A portfolio that has been perfectly balanced between risk and return is said to be optimal.…

Q: Elisa is covered by a $200,000 group term life insurance policy of which her daughter is the sole…

A: Annual premium = $0.75 per $1000 per month Maximum cost of the group term life insurance excluded is…

Q: Ginormous Oil entered into an agreement to purchase all of the outstanding shares of Slick Company…

A: To determine the value that Ginormous Oil placed on control of Slick Co., we need to calculate the…

Q: On October 24, you plan to purchase a $1,200 computer by using one of your two credit cards. The…

A: When the lender lends a loan to the borrower, he charges a rate of interest on the borrowed amount.…

Q: Allie gifted 100 shares of Fieri stock to Jim.  Allie (the donor) had a basis in the stock of $55…

A: When someone receives a gift of stock, the tax consequences depend on the donor's basis in the stock…

Q: Suppose you want to buy a $143,000 home. You found a bank that offers a 30-year loan at 3.9% APR.…

A: Information Provided: House price = $143,000 Loan period = 30 years Interest rate = 3.90%

Q: A stock has a beta of 0.73, the expected return on the market is 0.08, and the risk-free rate is…

A: To calculate the expected return on the stock by using the capital of surprising model we use the…

Q: Vigour Pharmaceuticals Ltd. is considering investing in a new production line for its…

A: Initial cost includes the cost of equipment, installation cost and increase in net working capital.…

Q: You have the choice of receiving $100,000 now or $43,000 now and another $70,000 three years from…

A: Present value refers to the current value of a future sum of money or cash flow, discounted at a…

Q: A firm has 7,000 outstanding shares with current value of 10£ per share. Planned dividend is £5 per…

A: To calculate the ex-dividend share price, we need to subtract the dividend amount per share from the…

Q: A 20-year annuity pays $1,200 per month, and payments are made at the end of each month. The…

A: The concept of time value of money will be used and applied here.   An annuity is a stream of…

Q: You owe $31,000 on student loans at an interest rate of 5.85% compounded monthly. You want to pay…

A: Information provided: Loan amount = $31000 Annual rate "r"= 5.85% Number of years "n" = 7 Number of…

Q: You have a portfolio consisting solely of stock A and stock B. The portfolio has an expected return…

A: In this we have to calculate weighted average return of portfolio.   The portfolio consist of stock…

Q: 2/5 of the crayons in a bag were red and the rest were blue and yellow. 20% of the blue crayons and…

A: Let's start by using algebra to solve the problem. Let x be the total number of crayons in the bag,…

Q: Buttons share price on 2 September 2019 was 8.10 pence. Its share price at 1 September 2020 was…

A: Dividend is the part or share of profits which is being distributed to shareholders in return for…

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.