A Risky Security Has a Variance of

question 9

Multiple Choice

A risky security has a variance of .023983 and a covariance with the market of .0323. The variance of the market is .01839. What is the correlation of the risky security to the market?

• A)1.54
• B)1.65
• C)1.72
• D)1.83
• E)1.85

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Definitions:

Operating Leverage

A measure of how sensitive a company's operating income is to a change in revenue, highlighting the impact of fixed costs on profitability.

Operating Cash Flow

The cash generated from a company's regular business operations, indicating its ability to generate sufficient cash to maintain operations.

Accounting Break-even Point

The point at which total costs and total revenues are equal, resulting in no net loss or gain.