Economics of Enterprise Answers

Your question (max 1024 symbols)Which of the following statements is CORRECT?
a. If Mutual Fund A held equal amounts of 100 stocks, each of which had a beta of 1.0, and
Mutual Fund B held equal amounts of 10 stocks with betas of 1.0, then the two mutual funds
would both have betas of 1.0. Thus, they would be equally risky from an investor's
standpoint, assuming the investor's only asset is one or the other of the mutual funds.
b. If investors become more risk averse but rRF does not change, then the required rate of return
on high-beta stocks will rise and the required return on low-beta stocks will decline, but the
required return on an average-risk stock will not change.
c. An investor who holds just one stock will generally be exposed to more risk than an investor
who holds a portfolio of stocks, assuming the stocks are all equally risky. Since the holder of
the 1-stock portfolio is exposed to more risk, he or she can expect to earn a higher rate of
return to compensate for the greater risk.
d. There is no

Suppose 1 U.S. dollar equals 1.60 Canadian dollars in the spot market. 6-month Canadian securities have an annualized return of 6% (and thus a 6-month periodic return of 3%). 6-month U.S. securities have an annualized return of 6.5% and a periodic return of 3.25%. If interest rate parity holds, what is the U.S. dollar-Canadian dollar exchange rate in the 180-day forward market?

discuss the usefulness of a cost and benefit analysis in policy decision making. (15 marks)

Which of the following statements is CORRECT?
a. Dividends paid reduce the net income that is reported on a company’s income statement.
b. If a company uses some of its bank deposits to buy short-term, highly liquid marketable securities, this will cause a decline in its current assets as shown on the balance sheet.
c. If a company issues new long-term bonds during the current year, this will increase its reported current liabilities at the end of the year.
d. Accounts receivable are reported as a current liability on the balance sheet.
E(correct) If a company pays more in dividends than it generates in net income, its retained. earnings as reported on the balance sheet will decline from the previous year's balance.

The following data represent the number of units of production per day turned out by 5 different workmen using different types of machines.

The real risk-free rate is 2.50%, investors expect a 3.50% future inflation rate, the market risk premium is 5.50%, and Krogh Enterprises has a beta of 1.40. What is the required rate of return on Krogh's stock? (Hint: First find the market risk premium.) (Points : 5) 13.70% 14.50% 15.30% 16.10% 16.90%

A purely competitive wheat farmer can sell any wheat he grows for $30 per bushel. His five acres of land show diminishing returns, because some are better suited for wheat production than others. The first acre can produce 1000 bushels of wheat, the second acre 900, the third 800, and so on. In the table given below answer the following questions. How many bushels will each of the farmer’s five acres produce? How much revenue will each acre generate? What are the TR and MR for each acre?