Answer:
The correct answer is Allocative efficiency.
Explanation:
Although there are different evaluation standards for the concept of allocation efficiency, the basic principle states that, in any economic system, the different options in the allocation of resources will produce both "winners" and "losers" in relation to the choice being evaluated. The principles of rational choice theory, individual maximization, utilitarianism and market theory assume, in addition, that the results for both winners and losers can be identified, compared and measured.
From these basic premises, the objective of maximizing the efficiency in the allocation can be defined according to some neutral principle in which some options are considered “objectively better than others”. For example, an economist might say that a change in policy increases the efficiency of allocation, as long as those who benefit from the change (winners) earn more than the losers lose.
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Answer:
Expected Return = 10.80%
Standard Deviation = 19.72%
Explanation:
Amount invested in Standard & Poor’s Depository Receipts = 60%
Expected return of Standard & Poor’s Depository Receipts = 10%
standard deviation of Standard & Poor’s Depository Receipts = 20%
Amount invested in MSCI EAFE Index Fund = 40%
Expected return of MSCI EAFE Index Fund = 12%
Standard deviation of MSCI EAFE Index Fund = 30%
Correlation between the two investments = 35%
Now,
Expected Return = ∑(Amount invested × Expected rate of return)
= 0.60 × 0.10 + 0.40 × 0.12
or
= 10.80%
Standard Deviation = √(∑(Amount invested × Standard deviation))²
= √[(0.60)²(0.20)² + (0.40)²(0.30)² + 2(0.60)(0.40)(0.20)(030)(0.35)]
or
Standard Deviation = 19.72%
Answer:
Your friend says that Company A is doing a great job for shareholders. He says that their ROA is high. You point out that shareholders tend to like debt and the Company A has low debt. Furthermore, ROA is biased towards companies with low debt. You suggest that __ROE______ is a better measure of the job management is doing for shareholders.
Explanation:
Company A's Return on Equity (ROE) is a financial measure that investors use to gauge how their equity investments in the company are generating income. The Return on Assets (ROA) helps the same investors to measure how management is using Company A's assets or resources to generate more income. Company A's ROE is determined by dividing its net income by the equity, while its ROA is determined by dividing its net income by the assets. If the ROE equals the ROA, it shows that there is no leverage (debts) held by Company A.