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

question 70

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 ____________ covariances.

• A) 45
• B) 780
• C) 4,950
• D) 10,000

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Definitions:

Comparative Advantage

The concept that a country, individual, or company produces a good or service at a lower opportunity cost than their competitors.

Trade

The exchange of goods or services between parties, which could be within an economy or between economies.

Coffee

A brewed drink prepared from roasted coffee beans, which are the seeds of berries from the Coffea plant.

Comparative Advantage

The ability of an individual or group to carry out a particular economic activity more efficiently than another activity.