A nation's market-risk premium is related directly to the:
a. Volatility of central bank policies due to unpredictable changes in major macroeconomic variables.
b. Volatility of a company's cash flows due to predictable and quantifiable changes in major macroeconomic variables.
c. Unpredictable changes in market structure, such as shifts from pure competition to oligopoly or oligopoly to monopoly.
d. A company's inability to market products in a recession or period of general disruption.
e. Volatility of a company's cash flows due to unpredictable changes in major macroeconomic variables.
.E
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Gross public debt minus all government interagency borrowing is
A) government budget deficit. B) an entitlement. C) U.S. Treasury bonds. D) net public debt.
During droughts, cities often impose water use restrictions on consumers. Suppose a representative consumer has preferences for Water (W) and other goods (X) given by the utility function:
U(W,X) = WX. Suppose the price of other goods is $1 and the price of water is initially 50ยข. The consumer has a budget of $50/week. a. How much water will the consumer purchase each week? b. Suppose the government imposes a quota on water use of 50 units/week. Show that the quota reduces the representative consumer's utility. c. By how much does the quota harm the representative consumer? Specifically, compute the equivalent variation of the quota.