You Expect Wesfarmers (WES) to Have a Beta of 1

question 16

Multiple Choice

You expect Wesfarmers (WES) to have a beta of 1.5 over the next year and the beta of Qantas (QAN) to be 1.9 over the next year. Also, you expect the volatility of WES to be 50% and that of QAN to be 35% over the next year. Which company has more systematic risk? Which company has more total risk?

• A) QAN, QAN
• B) WES, WES
• C) WES, QAN
• D) QAN, WES

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Definitions:

Creeping Inflation

A relatively low rate of inflation, such as the rate of less than 4 percent in the United States in recent years.

Market Economies

Economic systems in which economic decisions and the pricing of goods and services are guided solely by the aggregate interactions of a country's citizens and businesses.

Line Segment ST

A part of a line that is bounded by two distinct end points, labeled S and T.

Unemployed Resources

Economic resources, including labor, that are not currently in use or employed in the production process.