-Given the Prices for a and B at the Start

question 13

Multiple Choice

$\begin{array}{|c|c|c|}\hline \text { Asset } & \begin{array}{c}\text { Price at } \\\text { start of } \\\text { period (\$) }\end{array} & \begin{array}{c}\text { Price at } \\\text { end of } \\\text { period (\$) }\end{array} \\\hline \text { A } & \$ 3.25 & \$ 4.25 \\\hline \text { B } & \$ 4.12 & \$ 3.85 \\\hline & & \\\hline\end{array}$
-Given the prices for A and B at the start and end of the period,calculate the continuously compounded return on an equally weighted portfolio consisting of assets A and B.

• A) \(8.20 \%\)
• B) \(9.60 \%\)
• C) \(10.00 \%\)
• D)\(12.8 \%\)

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Definitions:

Equilibrium Interest Rate

The interest rate at which the quantity of money demanded is equal to the quantity of money supplied, leading to a balance in the money market.

Loanable Funds

The supply of money available for borrowing in the financial market, determined by savings and demand for borrowing.

Loanable Funds

The money available for borrowing, the supply of which is influenced by savings and demand for investment.

Real Interest Rate

The interest rate adjusted for inflation, representing the real cost of borrowing or the real yield on savings.