Use the Table for the Question(s)below

question 70

Multiple Choice

Use the table for the question(s) below.
Consider the following returns:
-The covariance between Stock X's and Stock Z's returns is closest to:

• A)0.05.
• B)0.06.
• C)0.10.
• D)0.71.

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Definitions:

Short Selling

The practice of selling securities or other financial instruments that are not currently owned, and subsequently repurchasing them at a lower price.

Market Neutral

An investment strategy that seeks to avoid some forms of market risk by taking offsetting positions in different securities, aiming for a net market exposure of zero.

Government Regulation

The act of controlling business behavior through a set of rules or laws set forth by the government to achieve outcomes that might not be achieved through free markets.

Incentive Fee

An incentive fee is a fee charged by a fund manager based on the fund's performance, encouraging the manager to achieve superior returns.