Assume That Stock Market Returns Do Not Resemble a Single-Index

question 29

Multiple Choice

Assume that stock market returns do not resemble a single-index structure.An investment fund analyzes 40 stocks in order to construct a mean-variance efficient portfolio constrained by 40 investments.They will need to calculate _____________ expected returns and ___________ variances of returns.

• A)100; 100
• B)40; 40
• C)4950; 100
• D)4950; 4950

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Definitions:

Profitability

A measure of the efficiency and effectiveness of a company in generating profit from its operations.

Solvency

The ability of a company to meet its long-term financial obligations.

Borrower Judged Insolvent

A situation where a borrower is legally declared unable to meet their debt obligations.

Court

A governmental institution with the authority to adjudicate legal disputes, applying and interpreting law in civil, criminal, and administrative matters.