Vertical Equity Means That

question 18

Multiple Choice

Vertical equity means that

• A)taxpayers with the same amount of income pay the same amount of tax.
• B)taxpayers with larger amounts of income should pay more tax than taxpayer's with lower amounts of income.
• C)all taxpayers should pay the same tax.
• D)none of the above.

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Definitions:

Beta

A means to compare the stability and risk factor of a security or portfolio relative to the market as a whole.

SML (Security Market Line)

A line that represents the expected return of an investment as a function of its risk, with the risk measured by the investment's beta.

Zero-investment Portfolio

A portfolio that is constructed without requiring any initial capital, typically by taking long and short positions that offset each other.

Short and Long Positions

Short positions involve selling securities not owned with the hope of buying them back at a lower price, while long positions involve buying securities with the expectation that they will increase in value.