Economics 2 Board Question

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I’m stuck on a Economics question and need an explanation.

Discussion #6

The stock market is a market just like any other market you can think of, only the stock market is a marketplace where stocks of companies are traded and not physical commodities like rice, coffee, or gold. There is a popular passive investing strategy that has been steadily gaining traction since its inception in the 1970’s which is called “indexing”. Indexing is where you attempt to replicate the overall performance of a stock market index, such as the S&P 500 index, which is a market capitalization weighted index comprised of the largest 500 stocks proportional to their market capitalizations. Market capitalization weighting works like this. If Apple’s overall stock value of its available shares represents 10% of the overall value of all the stocks in the S&P 500, then the weight given to Apple will be 10% in the index. So if you buy a single share of an index fund that tracks the S&P 500, then 10% of your investment is devoted to Apple stock.

The reason I am talking about this is because part of macroeconomics is to distinguish between the aggregate and the micro, or the difference between open and closed systems. For example, lets imagine a hypothetical situation where the 500 stocks comprising the S&P 500 were the only stocks you could buy or sell. In this hypothetical situation every market participant each has a thousand dollars to invest. The overall market performance of 500 stocks is a closed system, whereas the actions or performance of individuals is an open system. Let’s say that over a years’ time the value of the S&P 500 index goes up by 15%. An individual could take a selective position and buy a select number of stocks and have the remarkable performance of a 100% return over the same years’ time. However, by mathematical definition not every person participating in the market can have a 100% return, in fact the returns for each individual is a zero-sum game. This means that for every person that does better than the 15% average return, there is another person that does worse than 15%. In fact, the 15% return of the S&P 500 is only a weighted average return of all the market participants, which means that if you were to add up every market participants’ return and divide it by the number of participants it would come to 15%.

So indexing takes advantage of this mathematical truism by attempting to become the market return. Indexing strategists realize that it is very difficult to know ahead of time which stocks are going to perform better than the overall market. In fact, even attempting to beat the market entails significant costs such as research, transaction fees, and labor costs. And there is no guarantee that you will beat the market, rather you could actually underperform the market as mentioned earlier.

Assignment:

Watch the following PBS Frontline video on the financial industry and their involvement in the 401(k) retirement system:

http://www.pbs.org/wgbh/frontline/film/retirement-gamble/ (Links to an external site.)

Write two paragraphs on the following questions:
The financial industry is able to hire vast amounts of highly educated workers from elite universities. In fact, large numbers of these new graduates are from engineering, physics, and science backgrounds. How do you think productivity, technological innovation, and GDP are affected by the fact that the financial industry is able to lure these highly skilled graduates into the financial industry? Due to the exorbitant fees hidden in mutual funds, many retirees will not be able to keep the same standard of living that they were accustomed to in retirement. How do you feel this will affect GDP and governmental expenditures once people start retiring and living off their savings from their 401 (k).
Side note: I think that this PBS Frontline video is an invaluable documentary that will benefit you tremendously when planning for your own retirement. After watching it please do yourself a favor by doing some additional research by looking into the issues detailed in the piece when planning for your retirement.peer review
Need help with my Statistics question – I’m studying for my class.

In the week following the first part of the assignment complete the following peer review (Links to an external site.)Links to an external site. of the two classmates who submitted directly after you on Canvas. You must include feedback in the reviews that will enable the writers to improve their final submittal. As a minimum, address the following after considering the approach and justification of your peers’ work:
Are their approaches and justifications clear to you? What aspects of their responses were particularly helpful in making this clear? OR, What changes would help to make it clearer? Did your peers utilize a professional writing style as outlined in the assignment? Provide examples of how they did or did not meet this requirement.
At the end of your review, offer a general assessment of how your peers completed their assignments. Utilizing the exact language below, indicate whether they:
Met minimum writing requirements Exceeded minimum writing requirements Did not meet minimum writing requirements

this is the question to know what’s wrote:

Problem Description: Critical comparison of opposing claims, analytical thinking, and problem-solving

The amount of shaft wear (.0001 in.) after a fixed mileage was determined for each of n = 8 internal combustion engines having a copper lead as a bearing material, resulting in and s = 1.25. Assuming that the distribution of shaft wear is normal with mean μ, use the appropriate test at level .05 to test H0 :
μ

= 3.50 versus H
α

:
μ

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