USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 8

Multiple Choice

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Assume that you hold a two-stock portfolio. You are provided with the following information on your holdings:

-Refer to Exhibit 1.6. Calculate the market weights for stock 1 and 2 based on period t values.

• A) 39%for stock 1 and 61% for stock 2
• B) 50% for stock 1 and 50% for stock 2
• C) 71% for stock 1 and 29% for stock 2
• D) 29% for stock 1 and 71% for stock 2
• E) 30% for stock 1 and 82% for stock 2

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Definitions:

Income Elasticity

A measure of how much the quantity demanded of a good responds to a change in consumers' income.

Inferior Good

A type of good whose demand decreases when consumer income rises, unlike normal goods for which the opposite is true.

Marginal Utility

The additional satisfaction or utility gained by consuming an additional unit of a good or service.

Income Elasticity

It quantifies the sensitivity of the quantity demanded for a good to a change in consumer incomes, highlighting how demand varies as income levels shift.