Q: Explain how materiality differs for failure to follow GAAP and for lack of independence.
A: Generally Accepted Accounting Principles (GAAP): Generally Accepted Accounting Principles are the…
Q: In general terms, how does IFRS for SMEs differ from full IFRS?
A: International Financial Reporting Standards: IFRS (International Financial Reporting Standards) is…
Q: It says that step a is wrong. That those are not the right ROI's. Is there another way to solve that…
A: Introduction:- Return on investment indicates how well an investment performed in comparison to the…
Q: Why does the FASB recommend the direct method over the indirect method?
A: Definition: Financial accounting standards board (FASB): This is the organization that creates,…
Q: Difference Between Traceability and Controllability?
A: Following is the answer to the given question
Q: Which of the following is incorrect?
A: Accounting system is a structured system that is incorporated in a business entity to collect,…
Q: Which of the following statements is FALSE about "backward thought process'? Statement I. It…
A: a) neither of two statements is false
Q: In case where there is a conflict, the requiremnents of Conceptual Framework prevail those of the…
A: SOLUTION CONCEPTUAL FRAMEWORK MEANS THE WAY THE ACCOUNTS IS PREPARED , ACCOUNTING STANDARD BUILD AND…
Q: Why the limitation of portfilio analysis is itsuggests the use of standard strategies that can miss…
A: A portfolio is a collection of various investments. Portfolios are a vital part of a corporation…
Q: What does overstated mean?
A: Definition of Overstated:- Overstated uses two way terms by accountant: The entered or reported…
Q: Are there any reasons to question the validity of the CAPM?Explain.
A: In any ‘well-diversified portfolios’ the relationship between the ‘risk’ and the ‘required rate of…
Q: What are some disadvantages of the APT?
A: APT is the abbreviation used for the arbitrage pricing theory. A theory or a model for asset pricing…
Q: Which of the following factors will most likely have a negative impact or
A: Functions of Budget: Planning: It facilitates planning for future activities. Controlling: Budgets…
Q: Why is the NPV preferred over the IRR?
A: Net Present Value is a method of finding the profitability of a project by discounting future cash…
Q: Which of the following is false about Faithful Representation?
A: Answer Faithful representation is the requirement that the financial statements should be accurate…
Q: Which are the disadvantage of a C corp?
A: C corporation is the corporation that is taxed separately from its owners or shareholders. In other…
Q: MCMC and autocorrelation related to each other? If related, then what are the disadvantages…
A: GIVEN MCMC and autocorrelation related to each other? If related, then what are the…
Q: Which of the following statements is not correct?
A: Leave monetization is actually the leave encashment which means the if there is any earned leaves…
Q: feature of relevant information
A: Which one of the following is a feature of relevant information? Answer :- D. Neutrality
Q: For practical applicationsas opposed to theoretical considerations, which ismore relevant, the CML…
A: Security market line (SML) or Capital market line (CML): The capital market line appears the…
Q: Which of the following statements is NOT correct?
A: The yield of the bond refers to the return that investors will realize on investment when the…
Q: Identify and explain one major disadvantage of incorporating.
A: Incorporating is a legal and systematic method for the formation of a separate business entity for…
Q: What are the types of situations that result in troubleddebt?
A: Troubled debts can result in two different situations, which are as…
Q: What is the major disadvantage of the high-low method?
A: High-low method: High-low method is a method of calculating the variable cost and the fixed cost of…
Q: Why is EBITDA controversial?
A: Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) is a metric used to assess…
Q: What are the advantages and disadvantages of XERO?
A: XERO is cloud-based software of accounting that suite for small businesses, medium businesses, and…
Q: Usually, which outweighs the other in decentralization—advantages or disadvantages?
A:
Q: What is the primary difference between the APT and the CAPM?
A: APT is an abbreviation used for arbitrage Pricing Theory whereas CAPM is an acronyms used for…
Q: Which of the following statements is false?
A: Sinc as there are multiple questions are given, so as per answering guideline we do only first one.
Q: What is the VIX index? What is it used for? What are considered high values for the VIX and what do…
A: Volatility: - Volatility is a measure of movement or price variation in assets on daily, weekly,…
Q: Analyze the potential disadvantages of the LCNRV method
A:
Q: Explain how materiality differs for failure to follow GAAP and for lack of independence.
A: Auditing means the inspection of financial accounts of the company to determine if the records are…
Q: The Conceptual Framework is not an IFRS.
A: IFRS is an acronym of International Financial Reporting Standards The IFRS provides the standards…
Q: What is the underlying cause of ranking conflictsbetween NPV and IRR?
A: Net Present Value considers the time value of money that discounts the future cash flows to the…
Q: Which of the following is not considered to be an analytical procedure?
A: Answer: Comparisons of financial statements accounts with source documents
Q: What is underpricing? Why is it used? What evidence do we have to support the belief that…
A: Underpricing is a common term used in Initial public offering of shares of a private company which…
Q: costs and benefits of a too-big-to-fail
A: Too-Big-To-Fail Policy: Too-big-to-fail policy means saving a firm or industry whose failure can…
Q: What are the common benefits of GSIS and SSS?
A: GSIS is termed as a "government service insurance system" and it provides coverage of insurance to…
Q: What is anchoring bias?
A: Anchoring bias: Anchoring bias happens if persons depends on moreover on pre-existing data or the…
Q: Why are the realization and matching principles important? Only the importance
A: Accounting principles: These are the assumption, concepts, and guidelines necessary to prepare and…
Q: Which of the following statement/s are incorrect?
A: Liability: Liability: Amount of money or fund entity owns to pay outside or within the organization.…
Q: What is a goingconcern problem? What factors can contribute to such aproblem?
A: Given: To analyse about the going concern problem and its factors contribution as follows,
Q: Which of the following statements is false
A: A Bondholder gets a coupon amount calculated at a rate, on the face value. And at the end of…
Step by step
Solved in 3 steps
- Management has constructed the below table of estimates reflecting the possible returns and probabilities for pessimistic, most likely and optimistic results. Possible outcomes probability return(n$) Pessimistic 0.4 14.00 Most likely 0.2 34.00 Optimistic 0.4 6.00 a) Determine the expected value of return for the above company b) What is the risk involved if the company chooses to invest in the above opportunity?Suppose that as the economy moves through a business cycle, risk premiums also change. For example, in a recession, when people are concerned about their jobs, risk tolerance might be lower and risk premiums might be higher. In a booming economy, tolerance for risk might be higher and premiums lower.a. Would a predictably shifting risk premium such as described here be a violation of the efficient market hypothesis?b. How might a cycle of increasing and decreasing risk premiums create an appearance that stock prices “overreact,” first falling excessively and then seeming to recover?Page 271 12. Measuring risk (S9.1) Look again at Table 9.1. This time we will concentrate on Union Pacific. a. Calculate Union Pacific's cost of equity from the CAPM using its own beta estimate and the industry beta estimate. How different are your answers? Assume a risk-free rate of 2% and a market risk premium of 7%. b. Can you be confident that Union Pacific's true beta is not the industry average? c. Under what circumstances might you advise Union Pacific to calculate its cost of equity based on its own beta estimate?
- Please answer both QUESTION 5 Which of the following is not a reason why beta may differ between sources: Beta is based on historical values. Beta may be calculated using dfferent periodicities, such as monthly, weekly, or daily. The market benchmark may differ. Beta may be calculated using 3 years of data instead of 5 years of data. QUESTION 6 According to the CAPM, which of the following risks is irrelevant? O A. Market risk • B. All risks are always relevant 0 C. Unsystematic risk • D. Systematic riskAssume that the risk-free rate, RF, is currently 8%, the market return, RM, is 12%, and asset A has a beta, of 1.10. (could be done on word document or excel). Draw the security market line (SML) Use the CAPM to calculate the required return, on asset A. Assume that as a result of recent events, investors have become more risk averse, causing the market return to rise by 2%, to be14%. Ignoring the shift in part c, draw the new SML on the same set of axes that you used before, and calculate and show the new required return for asset A.response. Question 2 Which of the following statements about expected rate of return is most correct? The weighted average of the outcomes, where the weights are the probabilities The expected rate of return is equal to real risk-free rate and risk premium The expected rate of return is equal to Inflation rate plus risk-premium All of the listed choices are correct None of the listed choices s correct A Moving to another question will save this response. MacBook Air 888 esc Fa FA F2 F1 % O o o O O
- use attachment to answer questions This question relates to Diagram 2 from the 9.4 diagrams, which shows the Security Market Line. A share has a beta of 0.5 and, based on it's current price, has an expected return of 5%. Based on the CAPM, is the share overpriced, underpriced or correctly priced? Select one: a. Unable to determine without more information. b. Correctly priced c. Overpriced d. UnderpricedSuppose you observe the following situation: Security Pete Corporation Repete Company Beta 1.25 .87 Expected Return 1080 .0820 a. Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the risk-free rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Expected return on market using Pete Corporation a. Expected return on market using Repete Company b. Risk-free rate de de % % %Assume that the expected rates of return and the beta coefficients of the alternatives supplied by an independent analyst are as follows: Security Estimated rate of returns Beta Nescom 5% 1.5 Market 4 1 Pk_Steel 3.5 0.75 T_Bills 3 0 Nawab 1 -0.6 What is a beta coefficient, and how are betas used in risk analysis? Do the expected returns appear to be related to each alternative’s market risk? Is it possible to choose among the alternatives on the basis of the information developed thus far?
- (Figure in attachment!!!) Problem 4: For each of the following statements, judge if it is true or false, andprovide a detailed explanation behind your answers.a) Roll’s critique is that the market is never truly in equilibrium and henceone can never truly test whether the CAPM holds.b) The figure below shows the risk and expected return of 4 given assets.Consider an investor with “Mean-Variance” preferences, and the statement:“If the investor is indifferent between assets A and D, then she prefers Cto B; but if she is indifferent between B and C, she prefers A to D.”.c) Suppose you make a “scatter plot”, each point representing a pair ofcontemporaneous returns from a time series of returns on the marketportfolio and a single asset. If the CAPM holds, you would expect all points to line up perfectly on a straight line, the slope of which is theasset’s beta.PS: (Problem 4 figure in attachment!!!)What is the risk profile of those company? (How much overall risk is there inthis firm? Where is this risk coming from (market, firm, industry or currency)?How is the risk profile changing? The company is1) Berjaya Corporation Berhad 2) BSL Corporation BerhadNetflix has a beta of 2.25 and an expected return of 18%. If the expected return on the market is 12% and the risk- free rate is 1.5%, is Netflix correctly priced according to CAPM? Yes No, it is overpriced No, it is underpriced There is not enough information to answer this question A B C D