Question # 15A Report a ProblemGRevisitChoose the best optionA firm's business risk refers toO Variability in the debt-equity ratioO Variability in the expected EBITO Variability in the interest ratesO Increase in competitionDeepanshu | Support +1 650-924-9221+91 80 4719 0917 =P Type here to search

The degree of operating leverage shows the business risk of a firm. It is dependent on the fixed…

Question # 15 A Report a Problem Revisit Choose the best option A firm's business risk refers to O Variability in the debt-equity ratio O Vvarlability in the expected EBIT O Variability in the interest rates O Increase in competition

Question # 15 A Report a Problem Revisit Choose the best option A firm's business risk refers to O Variability in the debt-equity ratio O Vvarlability in the expected EBIT O Variability in the interest rates O Increase in competition

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 2P

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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.

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USING PAST INFORMATION TO ESTIMATE REQUIRED RETURNS Use online resources to work on this chapters questions. Please note that website information changes over time, and these changes may limit your ability to answer some of these questions. Chapter 8 discussed the basic trade-off between risk and return. In the capital asset pricing model (CAPM) discussion, beta was identified as the correct measure of risk for diversified shareholders. Recall that beta measures the extent to which the returns of a given stock move with the stock market. When using the CAPM to estimate required returns, we would like to know how the stock will move with the market in the future, but because we dont have a crystal ball, we generally use historical data to estimate this relationship with beta. As mentioned in Web Appendix 8A, beta can be estimated by regressing the individual stocks returns against the returns of the overall market. As an alternative to running our own regressions, we can rely on reported betas from a variety of sources. These published sources make it easy for us to readily obtain beta estimates for most large publicly traded corporations. However, a word of caution is in order. Beta estimates can often be quite sensitive to the time period in which the data are estimated, the market index used, and the frequency of the data used. Therefore, it is not uncommon to find a wide range of beta estimates among the various Internet websites. On the summary screen, you should see an interactive chart. Typically, you can chart performance over the last 24 hours, 1 month, 6 monthsup to 5 years, or even longer. Select different time periods and watch how the graph changes. On this screen you should also see a menu to select historical prices (historical data). Some websites will not only show daily activity but also weekly or monthly activity In addition, some websites will allow you to download the data into an Excel spreadsheet.
q15 Which type of brokerage account permits the broker to buy and sell shares for the investor without first contacting the investor for approval? a. Discretionary Account b. All the options are wrong c. Margin Account d. Cash Management Account q16 Buying assets that yield a return greater than the minimum acceptable hurdle rate is a part of which core principles of Finance. a. Cost principle b. Investment principle c. Dividend principle d. Financing principle
QUESTION 33 A debt ratio sufficiently close to D/A* to where the value of the firm is not much lower than at the maximum point is called the O near-rational range. backwardation O standard error data scope
GE MINDTAP Q Search this course jian 1 naining: 1:57:34 Save Is Which of the following statements is CORRECT, other things held constant? O a. If expected inflation increases, interest rates are likely to increase. O b. Interest rates on all debt securities tend to rise during recessions because recessions increase the possibility of bankruptcy, hence the riskiness of all debt securities. O c. If companies have fewer good investment opportunities, interest rates are likely to increase. O d. Interest rates on long-term bonds are more volatile than rates on short-term debt securities like T-bills. O e. If individuals increase their savings rate, interest rates are likely to increase. e here to search IN
Question 1 Fill the parts in the above table that are shaded in yellow. You will notice that there are nineline items. Question 2Using the data generated in the previous question (Question 1);a) Plot the Security Market Line (SML) b) Superimpose the CAPM’s required return on the SML c) Indicate which investments will plot on, above and below the SML? d) If an investment’s expected return (mean return) does not plot on the SML, what doesit show? Identify undervalued/overvalued investments from the graph
Time lef The choice of an appropriate capital structure depends upon a number of factors such as Select one: O a. Costs of firms O b. Nature of business and conditions of market O c. Benefits of firms O d. Conditions of firms Oe. None of the options https://moo 81% F1 F2 F3 F4 F5 F6 F7 F8 F9 C@ 23 & 2 4. V 8 A W T Y U S DEF 1GYHiJ ( CO
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A Moving to another question will save this response. Question 14 The market compensates investors for accepting which type(s) of risk? O None of the listed selections are correct O market and firm-specific risk O market risk only O firm-specific risk only O diversifiable risk A Moving to another question will save this response. MacBoc esc F1 F2 F3 F4 F5 # $ 2 4 W E T 60
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