Consider the following information: State of Economy Recession Normal Boom Probability of State of Economy Expected return .19 .46 .35 Rate of Return if State Occurs Calculate the expected return. Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. % -.10 .12 .31

Q: Why future value is important to calculate?

A: Future value is the value of what a certain asset/cash/instrument will be worth at a future…

Q: How can the Present-Worth Comparison be done?

A: The present worth method of comparison will diminish the cash flows of every choice to time zero by…

Q: What is the profitability index? When is it used?

A: Capital investment analysis: Capital investment analysis is the process by which management plans,…

Q: Assuming that the pure expectations theory is correct, how are expected short-termrates used to…

A: Pure expectations theory believes that expected future rates can be represented by the forward…

Q: What are the Profit margins?

A: Answer: Profit margin represents a product, company or sector profitability. It nothing but the…

Q: Explain renewal probability?

A: Answer: Renewal probability is nothing but the average percentage of renters in a building that is…

Q: Create a chart reflecting the conventional payback period?

A: The question is based on the calculation of payback period.

Q: What is forecast horizon?

A: Forecasting refers to the process where estimation about the future events is determined in advance…

Q: What happens if the payback period is within the acceptable range?

A: The payback period alludes to what extent it takes for a speculator to hit breakeven to recoup the…

Q: What is the marginal rate of return? How is it calculated?

A: Answer: Marginal rate of return can be defined as the return obtained or received by means of…

Q: what about in terms of present value?

A: Present value helps us know the value of future cash flows in the present time. A higher interest…

Q: Why are the net present value and the internal rate of return models superior to the payback period…

A: The net present value and internal rate of return techniques are superior to the payback method…

Q: state the limitations of the payback pe

A: Answer : The payback period is the quantity of time needed for cash inflows generated by a project…

Q: What causes the marginal rate of return to change over time?

A: Introduction: Marginal rate of return can be defined as the return attained or earned by holding a…

Q: What is a yield curve, and what information would you need todraw this curve?

A: Yield curve: It could be a line plotting bond yields (coupon rates) of comparative credit quality…

Q: What is the horizon value? Why is it also called the terminal valueor continuing value?

A: Horizon value is the value of the expected dividend that will be received after the horizon date.

Q: Present and Explain the theories of the Yield Curve?

A: The yield curve is a curve that shows the relationship between the interest rates and the different…

Q: ected rate of return concept differ from that of the rea

A: There are many method of valuation of stock based on expected rate and realized return and dividends…

Q: What does it mean when you have a risk-free guaranteed rate? Give an example as well as the…

A: Theoretically, an investor anticipates a return of no less than the risk-free rate on any investment…

Q: What is meant by the term abnormal rate of return?

A: Abnormal rate of return is return earned above or below the normal rate of return.

Q: Comparison of NPV, IRR or Payback period

A: The net present value (NPV) is the difference between the present value of cash inflows and…

Q: How is the payback period determined?

A:

Q: What is future value, FV?

A: Future Value: The future value is the value of the present amount compounded at an interest rate…

Q: Does the IRR measure ignore the scale of investment?

A: The internal rate of return (IRR) is a capital budgeting metric used to gauge the benefit of…

Q: What is meant by partitioning the internal rate of return? Why is this procedure meaningful?

A: Internal rate of return is defined as the annual rate of earnings on an investment and unlike income…

Q: How is it possible to achieve a higher rate of return without significantlyincreasing risk?

A: As we all learnes till now that higher the risk provides higher return and if we want the high…

Q: Why does riskiness increase with time?

A: Risk can be said as that difference that arises which arises on expected outcome or investment's…

Q: Which of the following is not a variable in the basic present value equation? Multiple Choice…

A: Investors are holding securities for the purpose of gaining the returns. The return is calculated…

Q: What do we mean by internal rate of return (IRR)?

A: Internal rate of return : Internal rate of return is one of the techniques used in capital budgeting…

Q: what is payback period

A: Capital Budgeting: It is the planning process used to determine whether an organization invests in a…

Q: Which project has no rate of return?

A: Answer: IRR is a measure in capital budgeting used to measure the value of the predicted…