In September 1997, a Brisbane Family's Weekly Diet Consisted of 6

question 25

Essay

In September 1997, a Brisbane family's weekly diet consisted of 6 kg of fish, 2 kg of beef and 2 kg of veal. One year later, because of the cost increases in these products, the family's diet has changed so that each week they consume 4 kg of chicken and 1 kg each of beef, veal, pork and fish. The prices are listed in the table below. $\begin{array}{lllll}&{\text { September } 1997} & &{\text { September } 1998} \\\hline &\text { Price }(\$) & \text { Quantity (kg) } & \text { Price (\$) } & \text { Quantity (kg) }\\\text { Item } & p_{i, 1997} & q_{i, 1997} & p_{i, 1998} & q_{i, 1998}\\\hline \text { Beef } & 5.50 & 2 & 5.92 & 1 \\\text { Veal } & 7.48 & 2 & 8.06 & 1 \\\text { Pork } & 4.80 & 0 & 5.05 & 1 \\\text { Chicken } & 3.62 & 0 & 3.45 & 4 \\\text { Fish } & 5.13 & 6 & 6.25 & 1\end{array}$ Calculate the Paasche price index for 1998, using 1997 as the base.

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Definitions:

Risk-Free Rate

The return on an investment with zero risk of financial loss, typically represented by the yield of government bonds.

Beta

A measure of a stock's volatility in relation to the overall market; a beta above 1 indicates that the stock is more volatile than the market, while a beta below 1 indicates it is less volatile.

Unadjusted Beta

Unadjusted beta is the raw beta value of a security or portfolio without any adjustments for its specific risks and characteristics, typically used as a measure of its volatility against the market.

Adjusted Betas

Betas that have been modified to account for the tendency of a stock's market risk measure to regress towards the mean over time, used in finance to predict future betas.