A margin account requires an initial margin of 50% and a margin call will occur if the stock price depreciates to $13.33. If stocks were initially purchased at $20, the maintenance margin is closest to: O A. 50% О В. 67% Ос. 25%

Q: Given data, • Lead time demand (dl) = 645 pounds • Standard deviation of demand (Olt) = 54pounds •…

A: At a given level of risk, safety stock is calculated by product of the z score of the risk and the…

Q: Question 1: a) Calculate the two period binomial model put price for a stock price of 40$, strike…

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Q: what is the return of stock a what is the return of stockb what is the standard deviation on stock…

A: Given: tate Probability(P) Return A Return B Poor 40% -0.08 -0.15 Normal 35% 0.19 0.14 Good…

Q: о A stock's returns have the following distribution: Demand for the Company's Products Demand…

A: Stock's expected return: 14.40%Standard deviation: 21.05%Coefficient of variation: 1.46Sharpe ratio:…

Q: Required Rate of Return AA Corporation's stock has a beta of 0.6. The risk-free rate is 3%, and…

A: To calculate the required return we will use the below formula   Required rate of return = Risk free…

Q: a) Calculate the expected rate of return, FB, for stock B3 (FA= 14,30%) b) Calculate the standard…

A: Risk and return are essential financial principles. The term “risk” refers to the uncertainty and…

Q: A stock price is $20. It has an expected return of 12% and a volatility of 35%. What is the standard…

A: The objective of the question is to calculate the standard deviation of the change in the price of a…

Q: Given the information below. Answer the following questions assuming the CAPM holds. Assets Expected…

A: CAPM represents a financial model that computes the expected rate of return of an asset or a…

Q: Suppose you valued a firm and came up with the value of equity of 9.50. The probability of financial…

A: The value of a share is the current market price of a stock of a company. It is calculated as the…

Q: A preferred stock is expected to pay a constant quarterly dividend of $1.25 per quarter into the…

A: In this question, we are required to determine the price of the preferred stock.

Q: (6-5) Expected Return: Discrete Distribution A stock's return has the following distribution: Demand…

A: 1. Expected Return = where , Ri = ReturnPi  = probability2.  standard deviation =     where ,Ri =…

Q: None

A: Step 1:

Q: A stock has a Beta of 1.0.  The risk-free rate is 4.7%, and the Market Risk Premium is estimated at…

A: Stock beta =1.0 Risk. Free rate =4.70% Market risk premium =7.40% Market risk premium = market…

Q: splits two-tor-one in the last period. 90 P1 100 95 200 45 200 110 A B C Po 90 50 100 Rate of return…

A: StocksPrice at time =0Shares outstandingPrice at time= 1Outstanding shares at 1Price at time…

Q: You have the following share price of XYZ.   DATE Price 2-Mar-2021 $100 3-Mar-2021 $60…

A: Geometric average rate of return will be calculated considering return in each period. Following is…

Q: Required: Calculate expected intrinsic price of stock

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Q: Suppose you invest in 150 shares of Harley-Davidson (HOG) at $40 per share and 250 shares of Yahoo…

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Q: 7) The historical nominal returns for stock A were -8 percent, +10 percent, and +22 percent. The…

A: Stock beta is tells the volatility of a given stock with respect to the overall market return. It…

Q: When a stock is going through a period of nonconstant growth for T periods, followed by constant…

A: The residual income valuation model is a metric used to evaluate the worth of the company on the…

Q: The reward-to-risk ratio for Stock X is %. Do not round any intermediate work. Round your *final*…

A: If we evaluate the stock with the help of CAPM than we will compare the actual return from the stock…

Q: Expected return for stock X is 10% Expected return for stock Y is 20%  If a portofolio is made up…

A: Expected Return of the portfolio is the weighted average return of the stock's return in the…

Q: Year     AT&T Stock Returns       Market Index Returns  1                         8…

A: Equation for stock return based on market return is constructed in this format: Y = mx +c Y is stock…

Q: None

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Q: You are considering the purchase of a share. The following table shows the possible returns from the…

A: Details workings are shown below-

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Q: Assuming you have a margin account verage you wish to sell short a stock currently priced at $25 per…

A: Given that             Leverage  Ratio =1.76           Stock Price =$ 25 per share           Equity…

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A: Capital Asset Pricing Model, or CAPM, is a well-known financial model that aids analysts and…

Q: Assume S = $33.00, σ = 0.32, r = 0.06, div = 0.01. You short 100 $35 strike calls at 68 days until…

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Q: James Peterson has gathered the following information of 5 exchange-traded funds (ETFS). The…

A: total return =p2+dp1-1 where, p2= price at year 2 p1 = price at year 1 d= dividend therefore,…

Q: There are two stocks in the market, Stock A and Stock B. The price of Stock A today is $76. The…

A: Expected return estimates average return, while standard deviation quantifies volatility, and beta…

Q: Calculate the stock's expected return. Round your answer to two decimal places. % Calculate the…

A: The expected return is the average expected outcome of investing in a company over a given period of…

Q: stock's returns have the following distribution: emand for the Probability of This ompany's Products…

A: The stock's expected return is the return anticipates on investment by the investor, it can be in…

Q: D1 = $1.25, g = 6.00%, β = 1.15, market risk premium = 5.5%, and risk free rate = 4 %.  Find the…

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Q: A stock's return has the following distribution: Demand for the Company's Products Probability of…

A: The expected return refers to the average profits that the investment provides. It is used to…

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Q: Hors d'Age Cheeseworks has been paying a regular cash dividend of $5.04 per share each year for over…

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Q: None

A: The CAPM formula will be used here. stock's expected return = risk free rate + (beta*(market rate of…

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Q: 39: Using the following closing prices and dividends compute the CWI (cumulative wealth index), the…

A: To compute the CWI, CPC, and CDY, we need to use the following formulas: CWI(t) = CWI(t-1) * (1 +…

Q: The common stock of Anthony Steel has a beta of 0.80.  The risk-free rate is 5 percent and the…

A: Cost of equity : As per capital asset pricing Cost of equity is calculated by the use of risk free…

Q: You are considering the purchase of a share. The following table shows the possible returns from the…

A: Standard deviation of a stock denotes the deviation for the return of stock. The deviations can be…

Q: beta of OGDCL is reduced to 0.8%, the return on OGDCL will.         a.Increase         b.No change…

A:

Q: |A stock's expected return has the following distribution: Demand for the product Probability Rate…

A: Demand for the product Probability Return of Return(ROR) Weak 10.00% 50.00% Below Average 20.00%…

Q: Consider the following multifactor (APT) model of security returns for a particular stock. Factor…

A: Expected return = RF+B1*(R1-RF)+B2*(R2-RF)+B3*(R3-RF)RF= Risk Free Rate(R-RF) =Risk Premium.B = Beta

Q: JaiLai Cos. stock has a beta of 0.9, the current risk-free rate is 5.5 percent, and the expected…

A: Stock beta = 0.90 Risk free rate = 5.5% Market return = 10%

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.