In Words, the Covariance Considers the Probability of Each Scenario

question 63

Multiple Choice

In words, the covariance considers the probability of each scenario happening and the interaction between

• A) securities' returns relative to their variances.
• B) securities' returns relative to their mean returns.
• C) securities' returns relative to other securities' returns.
• D) the level of return a security has in that scenario and the overall portfolio return.
• E) the variance of the security's return in that scenario and the overall portfolio variance.

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Definitions:

Net Income

The amount of money that remains after all operating expenses, taxes, and costs have been subtracted from total revenues.

Net Sales

Revenue from sales reduced by customer discounts, returns, and allowances.

Held-to-Maturity Debt Securities

Financial instruments that a firm intends and is able to hold until they mature, usually recorded at cost adjusted for amortization.

Equity Securities

Financial instruments that represent ownership interest in a company, such as stocks, granting holders a claim on part of the company's assets and earnings.