Answer:
e. the expected return on a security is positively and linearly related to the security's beta.
Explanation:
As per CAPM: Expected return (ER) = Rf + \beta (Rm - Rf)
Lets assume risk free return (Rf) as 5%, \beta as 2 and expected market return (Rm) as 10%
then, ER = 5% + 2 (10% - 5%) = 15%
However if lets assume all the other factors remain the same and \beta increases to 3
then, ER = 5% + 3 (10% - 5%) = 20%
Similarly if \beta reduces to 1
then, ER = 5% + 1 (10% - 5%) = 10%
So higher the \beta higher is the risk and hence higher the expected return. Hence expected return on a security is positvely and linearly related to the security's beta
I'd say your answer would be the interest rate so A
Answer:
Question 1 is Differences in perception versus reality
Question 2 is Rent ceilings reduce the quality and quantity of available housing.
Explanation:
Question 1
Perception is a way of regarding, understanding, or interpreting something; a mental impression as result of pre-existing notions. Shen judgement was based on her knowledge of economics of free markets without taking into consideration of exceptions.
Reality on the other hand is the state of things as they actually exist, as opposed to an idealistic or notional idea of them. Shen with her economics knowledge understands that the situation on ground does not conform with what Valerie knows. This is because perception is inherently flexible and speculative while reality disrespects viewpoints and view angles and is inherently rigid and factual.
Question 2
Rent ceilings stimulate demand and this cause shortages. Where the ceiling is set, there is more demand than at the equilibrium price.
This leads to shortage of supply of rent housing. This is because investors and landlords will stop building new houses or apartments to satisfy existing or increasing quantity demand. This shortage of supply somehow will lead to search activity and invariably affect the quality and quantity of available housing.
Answer:
The option (b) 2.4 is correct.
Explanation:
We can find price elasticity of demand by using the formula shown in the attachment attached with.
Since we know the quantities of product associated with the market price of the product, by putting values in the equation we have:
Price elasticity of Demand =
= [(6000 - 4000) / (6000 + 4000)/2] / [(13 - 11) / (13+11)/2]
Price elasticity of Demand = 2.4
So this is how we can find the price elasticity of supply which says that the producers will respond to prices drop by producing lower quantity of product.