Match Each of the Methods That Follow with the Correct

question 153

Multiple Choice

Match each of the methods that follow with the correct category (a or b) .
-Average rate of return method

• A)Method that does not use present value
• B)Method that uses present value

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Definitions:

Probability Distribution

A function that represents the likelihood of various outcomes in a random experiment.

Average Portfolio Standard Deviation

A measure of the volatility of all the assets in a portfolio, calculated as the square root of the variance of the portfolio's returns.

Coefficient of Correlation

A numerical metric evaluating the magnitude and orientation of a linear correlation between two variables, with values spanning from -1 to 1.

Capital Allocation Line

A graph showing risk-versus-return profiles of different portfolios, including the risk-free rate and a combination of risky assets, guiding optimal asset allocation.