Answer:
The correct answer is letter "D": Changing prices result in an inconsistent and/or inaccurate estimate of inflation.
Explanation:
The Consumer Price Index or CPI is considered the benchmark inflation guide for the U.S. economy. It uses a basket-of-good approach that aims to compare a consistent base of products from year to year. Focusing on products that are bought and used by consumers daily.
<em>The drawback of the CPI is the gap between the time in which information about those prices are collected and the time the CPI is useful to assess. Typically the prices are obtained monthly or bimonthly against the report of the CPI done each quarter or yearly. As CPI is one of the main measures of inflation, the previously explained could lead to inaccurate estimations of inflation.</em>
Answer: Option A
Explanation: In simple words, law of one price refers to the theory which states that, when the market is free and there is flexibility present in transactions then two identical products should sell for same amount in two markets using the same currency.
As per the law of one price, the brokers and dealers do not have any scope of arbitrage resulting in no further scope of earning abnormal profits. Hence from the above we can conclude that the correct option is A
Answer:
The demand for normal goods will fall or decrease and the demand for inferior goods will rise or increase
Explanation:
What is a recession? - Recession is a period in business cycle in which the aggregate economic activity of a country is slowing down or declining.
During recession, there is a decrease in spending on the part of both producers and consumers. Unemployment becomes high, so income level drops.
Demand for normal goods in this period drops because of the fall in level of income. The consumers are managing what is left from their income.
And demand for inferior goods rises because as a result of the constraints (money), consumers now prefer low quality goods which usually go for a lower price than normal goods
Answer:
8.934%
Explanation:
r(m) = r(f) + [b × r(p)]
r(m) = expected return = 9.975%
r(f) = risk free rate = 2%
b = beta = 1.45
r(p) = risk premium
so,r(p) = (9.975 - 2) ÷ 1.45
= 5.5%
for portfolio,
r(m) = r(f) + (b1 × w1 + b2 × w2) × r(p)
b1 = 1.45, w1 = (5 ÷ 5.5), b2 = 1.25, w2 = (0.5 ÷ 5.5)
r(m) = 2 + [1.45 × (5/5.5) + 1.25 × (0.5/5.5)] + 5.5
= 2 + 1.32 + 0.114 + 5.5
= 8.934%
