A Security Has a Zero Covariance with the Market

question 57

Multiple Choice

A security has a zero covariance with the market. This means that:

• A)the return on the security is always equal to that of the market.
• B)the return on the security moves in the same direction as the market return.
• C)the security is a risk-free security.
• D)there is no identifiable relationship between the return on the security and that of the market.
• E)the return on the security must vary more than that of the market.

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Definitions:

Shield Volcano

A type of volcano with broad, gently sloping sides, built by the eruption of low-viscosity lava that can flow long distances.

Caldera-forming

Refers to the process through which large craters are formed by the collapse of land following a volcanic eruption.

Natural Disasters

Severe, sudden events caused by environmental factors that result in significant damage or loss of life.

Basaltic Shield-forming

The process of creating large, gently sloping volcanic mountains through the accumulation of fluid basaltic lava flows.