Assume That Instead of Regarding Automobile Purchases as Consumer Goods,national

question 28

Multiple Choice

Assume that instead of regarding automobile purchases as consumer goods,national income accountants were to categorize them as capital goods? What would be the result?

• A)GDP would remain the same,but disposable income would be less.
• B)Disposable income would remain the same,but savings would increase.
• C)National income accounts would remain unchanged.
• D)Consumption spending would increase.

Calculate the standard deviation of returns on an active portfolio given its beta, the standard deviation of the market index, and its nonsystematic variance.

Describe the optimal weighting of securities within an active portfolio according to the Treynor-Black model.

Differentiate between a purely passive investment strategy and one that combines passive and active elements.

Use macroeconomic and composite forecasts to determine the optimal risky portfolio in the Treynor-Black model.

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Definitions:

Share Price

The market price at which a share of a company's stock can be bought or sold on a stock exchange.

Securities Markets

Platforms or systems facilitating the issuance and trading of financial instruments, such as stocks and bonds, providing liquidity and helping in capital formation.

Unbiased Expectations

Unbiased expectations theory suggests that the future interest rates can be estimated by using the current long-term interest rates, assuming they are an unbiased predictor of future rates.

Future Earnings

Projected or anticipated earnings of a company, based on current trends, industry conditions, and other factors.