You Own a Portfolio of 5 Stocks and Have 3

question 64

Multiple Choice

You own a portfolio of 5 stocks and have 3 expected states of the economy. You have twice as much invested in Stock A as you do in Stock

• A) The weights will be the probability of occurrence for each economic state.
• B) Each stock will have a weight of 20 percent for a total of 100 percent.
• C) The weights will decline steadily from Stock A to Stock E
• D) The weights will be based on the amount invested in each stock as a percentage of the total amount invested.
• E) The weights will be based on a combination of the dollar amounts invested as well as the economic probabilities.

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Definitions:

Taxable Income

The amount of income subject to taxes, after all deductions and exemptions are taken into account.

Nominally Progressive

Pertaining to tax structures where the nominal rates increase as the taxable base increases, without necessarily resulting in a higher effective tax rate on higher incomes due to possible deductions and exemptions.

Regressive Effect

A situation where a policy or economic condition disproportionately impacts lower-income individuals more negatively than those with higher incomes.

Proportional

Proportional refers to a relationship or distribution in which changes in one variable correspond to equal changes in another variable.