Use the Information for the Question(s)below

question 1

Multiple Choice

Use the information for the question(s) below.
Suppose the market portfolio's excess return tends to increase by 30% when the economy is strong and decline by 20% when the economy is weak.A type S firm has excess returns that increase by 45% when the economy is strong and decrease by 30% when the economy is weak.A type I firm will also have excess returns of either 45% or -30%,but the type I firm's excess returns will depend only upon firm-specific events and will be completely independent of the state of the economy.
-What is the Beta for a type S firm?

• A)1.5
• B)0.0
• C)1.0
• D)0.75

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Definitions:

Price Elasticity

A measure of how sensitively the quantity demanded of a good or service responds to a change in its price.

Supply

The total amount of a product or service available for purchase at any given time.

Demand

is the quantity of a product or service that consumers are willing and able to purchase at various prices at a given time.

Income Elasticity

The ratio of the percentage change in the quantity demanded of a good to the percentage change in consumer income, used to measure how changes in income affect demand.