Consider the following tax rate structures. Is it horizontally equitable? Why or why not? Is it vertically equitable? Why or why not?
Definitions:
Mutual-fund Theorem
A principle in finance that suggests diversifying investments across a broad range of assets to reduce risk without sacrificing return, associated with the modern portfolio theory.
Passive Investment Strategy
Investing in a diversified portfolio or market index without attempting to search out mispriced securities.
Active Strategies
Investment tactics that involve ongoing buying and selling actions by the manager or investor in an attempt to outperform the market or a specific benchmark.
Portfolio Beta
A measure of a portfolio's volatility or systemic risk compared to the overall market; a beta above 1 indicates higher than market volatility.
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