You Own a Stock That Will Produce Varying Rates of Return

question 21

Multiple Choice

You own a stock that will produce varying rates of return based upon the state of the economy. Which one of the following will measure the risk associated with owning that stock?

• A)weighted average return given the multiple states of the economy
• B)rate of return for a given economic state
• C)variance of the returns given the multiple states of the economy
• D)correlation between the returns given the various states of the economy
• E)correlation of the weighted average return as compared to the market

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Definitions:

GDP

Gross Domestic Product, the total value of all goods and services produced within a country in a given period.

Trade Deficit

A situation where a country's imports exceed its exports over a given period, leading to more money leaving the country than coming in.

Mixed Economy

An economic system combining elements of both capitalism and socialism, with some sectors privately owned and others controlled by the government.

Economy

The system by which goods and services are produced, distributed, and consumed within a particular country or region.