Under the CMT, the Relevant Risk to Consider with Any

question 34

Multiple Choice

Under the CMT, the relevant risk to consider with any security is:

• A) its correlation with other securities in the portfolio.
• B) its covariance with the market portfolio.
• C) its deviation from the portfolio required rate of return.
• D) its variance from the risk-free rate of return.

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Definitions:

Beyond

A term used to indicate something that is at a further place or stage than something else.

Micro-

A prefix meaning small or minute, often used in scientific terms to denote a factor of one millionth.

Small

Of a size that is less than normal or usual; the term is relative and can be used in various contexts to denote physical size.

Auto-

A prefix meaning self or same, used in terms that denote self-action, such as autoimmunity.