Use the Table for the Question(s)below

question 89

Multiple Choice

Use the table for the question(s) below.
Consider the following returns:
-The Volatility on Stock Z's returns is closest to:

• A)3%.
• B)13%.
• C)16%.
• D)18%.

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Definitions:

Risk-free Interest Rate

The theoretical rate of return of an investment with zero risk of financial loss, often represented by the yield on government bonds.

Two-factor Model

A financial model that considers two sources of risk in its valuation or pricing, typically used in evaluating or predicting financial returns.

Market Risk

The risk of losses due to factors that affect an entire market or asset class, also known as systematic risk, which cannot be eliminated through diversification.

Interest Rate Risk

The potential for investment losses resulting from changes in interest rates.