A Growth Equity Portfolio and a Value Portfolio Might Be

question 21

Multiple Choice

A growth equity portfolio and a value portfolio might be characterized:

• A)each by their P/E relative to the index P/E; high P/E for growth and lower for value.
• B)as earning a high rate of return for a growth security and a low rate of return for value security irrespective of risk.
• C)low unsystematic risk and high systematic risk respectively.
• D)moderate systematic risk and zero systematic risk respectively.
• E)None of the above.

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Definitions:

Perfect Substitute

Goods or services that can be used in exactly the same way and are considered interchangeable by the consumer.

Indifference Curve

A graph representing combinations of two goods that provide an individual with the same level of satisfaction and utility.

Convex Preferences

A situation in consumer theory where a consumer prefers combinations or mixtures of goods to extreme amounts of either good, illustrating a desire for diversified consumption.

Indifference Curves

Graphical representations of different combinations of two goods that give a consumer equal satisfaction and utility.