Consider a Risky Asset That Has a Standard Deviation of Returns

question 99

Multiple Choice

Consider a risky asset that has a standard deviation of returns of 15. Calculate the correlation between the risky asset and a risk-free asset.

• A) 1.0
• B) 0.0
• C) -1.0
• D) 0.5
• E) -0.5

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Definitions:

Regression Equation

A mathematical formula that describes the relationship between one dependent variable and one or more independent variables, typically used for prediction or forecasting.

R-Square

A statistical measure that represents the proportion of the variance for a dependent variable that's explained by an independent variable or variables in a regression model.

Regression Line

A statistical tool represented as a line on a graph that best fits the data points, showing the relationship between two variables.

Profits

The financial gain obtained when the revenues from business activities exceed the expenses, costs, and taxes associated with the operation.