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

question 24

Multiple Choice

You expect Wesfarmers (WES) to have a beta of 1.3 over the next year and the beta of Qantas (QAN) to be 0.9 over the next year. Also, you expect the volatility of WES to be 40% and that of QAN to be 30% over the next year. Which company has more systematic risk? Which company has more total risk?

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

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Definitions:

Network Effects

The effect that additional users of a good or service have on the value of that product to others, typically increasing the value with more users.

Natural Monopoly

A market structure where a single firm can provide a good or service at a lower cost than any potential competitors, usually due to economies of scale.

Standard Product

A product that is uniform in quality and specifications, produced in large quantities, and often interchangeable with similar products from other manufacturers.

Highest Price

The maximum price at which a good, service, or asset is sold in the market, often influenced by factors such as scarcity, demand, and quality.