Define the Term Rationing Device and Give an Example of Each

question 98

Essay

Define the term rationing device and give an example of each of three possible rationing devices.Explain how scarcity implies the need for a rationing device.

---

Definitions:

Market Risk Premium

Market Risk Premium is the additional return an investor expects from holding a risky market portfolio instead of risk-free assets.

Risk-free Rate of Return

The anticipated profit from a riskless investment, usually tied to government treasuries.

Annualized Rate

A projected rate of return or growth over a period of one year, taking into account the effect of compounding over that period.

Beta Coefficient

The beta coefficient measures a stock's volatility in comparison to the overall market, indicating how much the stock price is likely to change relative to market movements.