A Discrete Probability Distribution

question 5

Multiple Choice

A discrete probability distribution

• A)is a set of possible values and a corresponding set of probabilities that sum to 1.
• B)is a modeling tool that can be used to incorporate uncertainty into models.
• C)can be estimated from long-run proportions.
• D)is the distribution of a single random variable.

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Definitions:

Low Beta Portfolios

Investment portfolios comprised of assets that have lower volatility and are less sensitive to market movements compared to the broader market.

Security Market Line

A line in the capital asset pricing model (CAPM) that depicts the relationship between the expected return of an investment and its risk.

Return and Risk-Free Rate

The difference between the total return on an investment and the risk-free rate of return, indicating the excess compensation for taking on risk.

Beta

An assessment of how much a security fluctuates in comparison to the general market.