# Consider the following information: Probability of State Rate of Return if State Occurs Economy of Economy Stock A Stock B Recession .20 .010 – .35 Normal .55 .090 .25 Boom .25 .240 .48 a. Calculate the expected return for the two stocks.'

11.15%

Explanation:

The formula to compute the expected rate of return is shown below:

Expected rate of return = (Recession probability× Possible Returns ) + (Normal Probability  × Possible Returns ) + (Boom Probability  × Possible Returns 3)

= (0.20 × 0.010) + (0.55 × 0.090) + (0.25 × 0.240)

= 0.002+ 0.0495 + 0.06

= 11.15%

Simply we multiply the probability with its return so that accurate rate could come.

## Related Questions

Dana, who is a trained yoga instructor, spends 4 hours on Monday baking and packing 10 boxes of cookies. She sells the cookies for \$10 a box. Given that she can also teach yoga for \$80 an hour, what is her opportunity cost of baking cookies?A. \$220 B. \$800 C. \$320 D. \$420 E. \$100

c. \$320

Explanation:

Opportunity cost is an economic term for expressing cost in terms of forgone alternatives. The opportunity cost of Dana is calculated as;

Hours spent baking cookies = 4 hours, the amount earned per hour when Dana is working as yoga instructor = \$80.

Therefore, the total opportunity cost of Dana, when she is baking is cookies;

= 4 hours × \$80

= \$320.

The structure of repayment for most long-term bonds consists of a. fixed coupon payments every year until maturity. b. interest payments that vary by the yield to maturity each year. c. fixed coupon payments each year plus the face value or par value at maturity. d. converted payments from interest to dividends halfway to the bond's maturity. e. a balloon payment at maturity.

The correct answer is letter "B": interest payments that vary by the yield to maturity each year.

Explanation:

Bonds are investments in the form of loans that companies provide. The firm pays investors a coupon yield, which is the annual or semiannual interest paid on the principal of the bond purchased. The payments continue until the bond reaches its maturity or the amount of the principal is completely paid off.

"Audits may be characterized as (a) financial statement audits, (b) compliance audits, or (c) operational audits"

Audit is an independent examination of records,financial statements or process in order to give report to the party that has commissioned the audit

Explanation:

Audit can be of the three types highlighted in the question.

Audit of financial statements involves an external auditor examining the financial statements of clients i.e the income statement,statement of financial position.the cash flow statement as well statement of changes in equity e.t.c with a view to expressing an opinion on whether the financial statements show a true and fair view of the performance of the organisation audited and sometimes whether they were prepared in line with generally accepted accounting standards such as US GAAP.

Compliance audit is simply to find out whether the person audited has conformed with certain laid down policies and procedures such as the policies to follow in granting credit facilities to bank customers.

Process audit is about examining a process to see if the steps taken by the person carrying the tasks are logical and to find out areas for improvement in order to cut down time and resources used.

For the current year ending January 31, Ringo Company expects fixed costs of \$178, 500 and a unit variable cost of \$41.50. For the coming year, a new wage contract will increase the unit variable cost to \$45. The selling price of \$50 per unit is expected to remain the same. Compute the break-even sales (in units) for the current year. Compute the anticipated break-even sales (in units) for the coming year, assuming the new wage contract is signed.

The break-even sales (in units u) for the current year is 210,000 units.

The anticipated break-even sales (in units t) for the coming year, assuming the new wage contract is signed is 357,000 units.

Explanation:

The BEP which is the break even point is the point where the company's sales or revenue generated is equal to the cost incurred. As such, the BEP is the number of units that must be sold for the company to make neither a profit nor a loss.

Both sales and variable cost are dependent on the number of units sold.

The sales less the variable cost gives the contribution margin. The contribution margin less the fixed cost gives the net operating income.

The break-even sales (in units u) for the current year

50u - 41.5u - 1785000 = 0

8.5u = 1785000

u = 1785000/8.5

= 210,000 units

The anticipated break-even sales (in units t) for the coming year, assuming the new wage contract is signed

50u - 45u - 1785000 = 0

5u = 1785000

u = 1785000/5

= 357,000 units

a. What is owners’ equity for 2018 and 2019?

owners' equity 2018 = \$8,435

owners' equity 2019 = \$7,381

b. What is the change in net working capital for 2019?

-\$463

c-1. In 2019, the company purchased \$8,038 in new fixed assets. The tax rate is 23 percent. How much in fixed assets did the company sell?

net capital spending = \$14,511 - \$14,060 + \$3,885 = \$4,336

net capital spending = fixed assets purchased - sold

\$4,336 = \$8,038 - fixed assets sold

fixed assets sold = \$3,702

c-2. What is the cash flow from assets for the year?

operating cash flow = EBIT + depreciation - taxes = \$18,593 + \$3,885 -  \$4,276 = \$18,202

cash flow from assets = operating cash flow - change in net working capital - net capital spending = \$18,202 - (-\$463) - \$4,336 = \$14,329

d-1. During 2019, the company raised \$2,479 in new long-term debt. What is the cash flow to creditors?

new long term debts = \$8,419 (2019) - \$7,377 (2018) = \$1,042

cash flow form creditors = new long term debts - interests = \$1,042 - \$995 = \$47

d-2. How much long-term debt must the company have paid off during the year?

new long term debts = new debt - retired debt

\$1,042 = \$2,479 - retired debt

retired debt = \$2,479 - \$1,042 = \$1,437

a)The owners' equity for 2018 and 2019 is \$8,435 and \$7,381. b) The change in net working capital for 2019 is \$463. c-1) The fix assets sell are \$3,702, c2-The cash flow from assets for the year is \$14,329. d-1)The cash flow to creditors is \$47 and d-2)The long-term debt that the company must have paid off during the year is \$1,437.

a)owners' equity 2018 = \$8,435 owners' equity 2019 = \$7,381

b. The change in net working capital for 2019 is \$463

c-1. The company purchased \$8,038 in new fixed assets. The tax rate Is 23 percent. The fixed assets sold are:

net capital spending \$14,511 \$14,060+ \$3,885-\$4,336

net capital spending = fixed assets purchased-sold

\$4,336 \$8,038-fixed assets sold

fixed assets sold = \$3,702

c-2. The cash flow from assets for the year is:

operating cash flow - EBIT + depreciation-taxes = \$18,593 +\$3,885- \$4,276 \$18,202

cash flow from assets = operating cash flow-change in net working capital- net capital spending \$18,202 (-\$463)-\$4,336 \$14,329

d-1. During 2019, the company raised \$2,479 in new long-term debt. The cash flow to creditors is:

new long term debts = \$8,419 (2019) - \$7,377 (2018) = \$1,042 cash flow form creditors = new long term debts interests \$1,042 - \$995 = \$47

d-2. The long-term debt that the company must have paid off during the year is:

new long term debts = new debt-retired debt \$1,042 \$2,479 - retired debt

retired debt = \$2,479 - \$1,042 = \$1,437

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The buying culture of a place refers to the factors that influence the purchase of goods and services in an environment. The buying culture in my hometown is the value-added culture. This is because the people in my hometown purchase goods and services mainly when they feel that there is a problem it will help them solve.

• The value-added buying culture is that wherein the buyer senses that a product will help them to solve a problem that plagues them.

• For example, most people in my hometown only go to the pharmacy and clinic when they are sick.

• They do not believe in the idea of occasional check-up because they think that it is a waste of money.

• Therefore, goods are purchased only when they are crucially needed.