What will determine the new rk to be

Assignment Help Finance Basics
Reference no: EM13300599

Yesterday Susan determined that the risk-free rate of return rRF, is 3 percent, the required return on the market portfolio, rM, is 10 percent, and the required rate of return on Stock K, rK, is 17 percent. Today Susan received new informstion that indicates investors are more risk averse than she thought, such that the market risk premium, RPm, actually is 1 percent higher than she estimated yesterday. When Susan considers the effect of this change in risk premium, what will determine the new rK to be?

Reference no: EM13300599

Questions Cloud

Explain the best to use when 0.050 m benzoic acid : Which of the following indicators would be the best to use when 0.050 M benzoic acid (Ka = 6.6 × 10-5) is titrated with 0.05 M NaOH
Create a query using the curtin patient data : Create a query using the Curtin Patient Data 06_07 table and call it qryLength_of_Stay. In this query show the UMRN, AdmNumber, AdmisDate, DischDate. Create a new column called LOS. In this column, subtract the AdmisDate from the DischDate to obtain ..
Why did the price of the bond change : A $1,000 bond has a 7.5 percent coupon and matures after 10 years. If current interest rates are 10 percent, what should be the price of the bond?
What is the coefficient of rolling resistance on the road : A bicyclist is riding a bicycle on a flat road. The combined mass of the bicyclist and bicycle is = 110kg, the radius of each wheel is = 32.5cm, and the coefficient of rolling resistance between the tires and the road is = 0.245 cm.
What will determine the new rk to be : When Susan considers the effect of this change in risk premium, what will determine the new rK to be?
What is the minimum amplitude of vibration : A computer to be used in a satellite must be able to withstand accelerations of up to 25 times the acceleration due to gravity. What is the minimum amplitude of vibration that must be used in this test
Define what is the ph of the solution after koh : A 25.0-mL sample of 0.35 M HCOOH is titrated with 0.20 M KOH. What is the pH of the solution after 25.0 mL of KOH has been added to the acid? Ka = 1.77 × 10-4
Prepare a hypothetical budget covering sales : Prepare a hypothetical budget covering sales, production, materials, labor and overhead budget. Explain the significance of these budgets.
Which of the investments should risk-averse investor prefer : Based on the total risk of return, which of the investments should a risk-averse investor prefer?

Reviews

Write a Review

Finance Basics Questions & Answers

  Compute patent amortization expenses

Sony Company purchased a patent for $180,000 on September 1, 2006. It had a useful life of ten years. On January 1, 2008, ELO spent $44,000 to successfully defend the patent in a lawsuit.

  Forecasting conclusions that support tfc’s decision

From the scenario, cite your forecasting conclusions that support TFC’s decision to expand to the West Coast market. Speculate as to whether or not the agency conflict discussed in the scenario could become a roadblock to your conclusions.

  Global manufacturing

You are employed by a CPA firm that has an international client, Global Manufacturing, with home offices in a country in the European Union.

  How much will your purchasing power increase

An invesment offers to pay you 12% over the next year. You expect inflation to be 2.5% over that same year. How much will your purchasing power increase if you make this investment?

  Compute the the cost of debt

J & B Inc. has $5 million of new debt to finance a project with a coupon rate of 12 percent, paid semiannually and has a par value of $1,000. The bonds will mature in 14 years and are priced at $850,

  Compute the equivalent uniform annual costs of owning

A piece of machinery costs $10,000. After 5 years, the salvage value is $1,000. Annual maintenance costs are $500. If the interest rate is 10%, compute the equivalent uniform annual costs of owning this equipment for 5 years.

  Underpricing the efficient market hypothesis

Most initial public offerings (IPO) are made with assistance of an investment banker. Main activity of an investment banker is underwriting the issue.

  What would the annual interest rate from the company

A payday loan company charges 4 percent interest for a two week period. What would the annual interest rate from the company.

  How much is each end of the year payment

A woman borrows sixty-five thousand dollars and will repay the loan in equal annual payments over the next 10 years. The interest rate on the loan is 9%. How much is each end of the year payment?

  Estimating required return on stocks

Stock A has a beta of .8, Stock B has a beta of 1, and Stock C has a beta of 1.2. Portfolio P has similar amounts invested in each of three stocks.

  Describe in general terms how each option

Describe in general terms how each option could change a project's NPV and show the corresponding risk of each option, relative to what would have been estimated if the option had not been considered.

  Evaluate the firm approach to pollution control

Loren Seguara and Dale Johnson both work for Sports Products, Corporation, a major producer of boating machine and accessories. Loren works as a clerical assistant in the Accounting Department, and Dale works as a packager in the Shipping section.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd