A Farmer Produces the Same Output in 2012 as in 2011.His

question 84

Multiple Choice

A farmer produces the same output in 2012 as in 2011.His input prices increase by 3 percent and so does his product price.Which inflation rate makes the farmer as well off in 2012 as in 2011?

• A)6 percent
• B)3 percent
• C)1 percent
• D)0 percent

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Definitions:

Mean-Variance Efficient Portfolio

An investment portfolio constructed to offer the highest expected return for a given level of risk, or the lowest risk for a given level of expected return, based on mean-variance optimization.

Expected Returns

The anticipated profit or loss from an investment, based on projections or historical data.

Variances of Returns

A statistical measure of the dispersion of returns for a given security or market index, often used to quantify risk.

Mean-Variance Efficient Portfolio

A portfolio constructed to have the highest possible return for a given level of risk, or equivalently, the lowest risk for a given level of expected return, according to Harry Markowitz's theory.