Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN: 9781285165875
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 27, Problem 3QR
To determine
Benefit of diversification.
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Principles of Economics, 7th Edition (MindTap Course List)
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- Which type of financial intermediary provides individual investors with professional management of their money and diversification in order to limit the risk of investing? A. mutual funds B. insurance companies C. hedge funds D. investment banksarrow_forwardCorpCo is a large manufacturing firm with many stockholders. a. The firm paid a dividend of $6 during the past year and it estimates dividends to grow at 7% annually in the future. Firm’s stockholders require a rate of return of 14%. What would be the expected value of each share today? b. Which are the two basic risks affecting returns when shareholders value any business? Briefly explain.arrow_forwardYour bank account pays an interest rate of 8 percent. You are considering buying a share of stock in XYZ Corporation for $110. After 1, 2, and 3 years, it will pay adividend of $5. You expect to sell the stock after 3 years for $120. Is XYZ a good investment? Support your answer with calculations.arrow_forward
- The total value of a firm's stock which can be computed by multiplying the number of shares outstanding by the market price per share is called what? a. Market capitalization b. Market return c. Market weighted d. Market betaarrow_forwardDiscuss the rationale for expecting an efficient capital market. What factor would you look for to differentiate the market efficiency for two alternative stocks?arrow_forwardJohn owns the following portfolio of stocks. What is the return on her portfolio? Stock Amount Invested Return on Stock A $4,000 7.5% B $2,000 11.0% C $4,000 9.3%arrow_forward
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