The meaning of risk premium. Introduction: Risk refers to the movement in the value of an investment. The movement can be positive or negative. The investor will gain if the movement is positive, and the investor will lose if the movement is negative.

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Chapter 12.3, Problem 12.3ACQ

Summary Introduction

To discuss: The meaning of risk premium.

Introduction:

Risk refers to the movement in the value of an investment. The movement can be positive or negative. The investor will gain if the movement is positive, and the investor will lose if the movement is negative.

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California Construction Inc. is considering a 15 percent stock dividend. The capital accounts are: Common stock (6,000,000 shares at $10 par) ....... $60,000,000 Capital in excess of par* ...................................... 35,000,000 Retained earnings ................................................ 75,000,000 Net worth ......................................................... $170,000,000 *The increase in capital in excess of par as a result of a stock dividend is equal to the shares created times (Market price – Par value). The company’s stock is selling for $32 per share. The company had total earnings of $19,200,000 with 6,000,000 shares outstanding and earnings per share were $3.20. The firm has a P/E ratio of 10. a. Show the new capital accounts if a 15 percent stock dividend is given. b. What adjustments would be made to EPS and the stock price? (Assume the P/E ratio remains constant.) c. How many shares would an investor have if they originally had 80 shares? d. What…

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Terrill Machining Inc. sells machine parts to auto mechanics. It has not paid a dividend in many years but is currently contemplating some kind of dividend. The capital accounts for the firm are as follows: Common stock (2,400,000 shares at $5 par) . Capital in excess of par* ............................... Retained earnings ......................................... Net worth ................................................... $12,000,000 5,000,000 23,000,000 $40,000,000 *The increase in capital in excess of par as a result of a stock dividend is equal to the new shares created times (Market price – Par value). The company’s stock is selling for $20 per share. The company had total earnings of $4,800,000 during the year. With 2,400,000 shares outstanding, earnings per share were $2.00. The firm has a P/E ratio of 10. a. What adjustments would have to be made to the capital accounts for a 10 percent stock dividend? Show the new capital accounts. b. What adjustments would be made to…

Answer 2

Question

Chapter 12.3, Problem 12.3ACQ

Summary Introduction

To discuss: The meaning of risk premium.

Introduction:

Risk refers to the movement in the value of an investment. The movement can be positive or negative. The investor will gain if the movement is positive, and the investor will lose if the movement is negative.

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Answer 3

Question

Chapter 12.3, Problem 12.3ACQ

Summary Introduction

To discuss: The meaning of risk premium.

Introduction:

Risk refers to the movement in the value of an investment. The movement can be positive or negative. The investor will gain if the movement is positive, and the investor will lose if the movement is negative.

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Answer 4

Question

Chapter 12.3, Problem 12.3ACQ

Summary Introduction

To discuss: The meaning of risk premium.

Introduction:

Risk refers to the movement in the value of an investment. The movement can be positive or negative. The investor will gain if the movement is positive, and the investor will lose if the movement is negative.

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Answer 5

Chapter 12.3, Problem 12.3ACQ

Summary Introduction

To discuss: The meaning of risk premium.

Introduction:

Risk refers to the movement in the value of an investment. The movement can be positive or negative. The investor will gain if the movement is positive, and the investor will lose if the movement is negative.

Answer 6

Chapter 12.3, Problem 12.3ACQ

Summary Introduction

To discuss: The meaning of risk premium.

Introduction:

Risk refers to the movement in the value of an investment. The movement can be positive or negative. The investor will gain if the movement is positive, and the investor will lose if the movement is negative.

Answer 7

Chapter 12.3, Problem 12.3ACQ

Summary Introduction

To discuss: The meaning of risk premium.

Introduction:

Risk refers to the movement in the value of an investment. The movement can be positive or negative. The investor will gain if the movement is positive, and the investor will lose if the movement is negative.

Answer 8

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Answer 11

Ch. 12.1 - Prob. 12.1ACQ Ch. 12.1 - Why are unrealized capital gains or losses...Ch. 12.1 - What is the difference between a dollar return and...Ch. 12.2 - Prob. 12.2ACQ Ch. 12.2 - Why doesnt everyone just buy small stocks as...Ch. 12.2 - What was the smallest return observed over the 88...Ch. 12.2 - About how many times did large-company stocks...Ch. 12.2 - What was the longest winning streak (years without...Ch. 12.2 - How often did the T-bill portfolio have a negative...Ch. 12.3 - Prob. 12.3ACQ

The meaning of risk premium. Introduction: Risk refers to the movement in the value of an investment. The movement can be positive or negative. The investor will gain if the movement is positive, and the investor will lose if the movement is negative.

Solution Summary: The author explains that risk refers to the movement in the value of an investment. The government issues Treasury bills, which are risk-free.

To discuss: The meaning of risk premium.

Introduction:

Risk refers to the movement in the value of an investment. The movement can be positive or negative. The investor will gain if the movement is positive, and the investor will lose if the movement is negative.

Want to see the full answer?

Chapter 12 Solutions

The meaning of risk premium. Introduction: Risk refers to the movement in the value of an investment. The movement can be positive or negative. The investor will gain if the movement is positive, and the investor will lose if the movement is negative.

Solution Summary: The author explains that risk refers to the movement in the value of an investment. The government issues Treasury bills, which are risk-free.

To discuss: The meaning of risk premium. Introduction: Risk refers to the movement in the value of an investment. The movement can be positive or negative. The investor will gain if the movement is positive, and the investor will lose if the movement is negative.

Want to see the full answer?

Chapter 12 Solutions

To discuss: The meaning of risk premium.

Introduction:

Risk refers to the movement in the value of an investment. The movement can be positive or negative. The investor will gain if the movement is positive, and the investor will lose if the movement is negative.