What Is the Variance of the Returns on a Security

question 7

Multiple Choice

What is the variance of the returns on a security given the following information?
$\begin{array}{lrr}\text { state of the Economy}&\text { Probabllity}&\text { Rate of}\\&\text {of State of Economy}&\text {Return if}\\&&\text {State Occurs}\\\text { Boom } & .20 & 16 \% \\\text { Normal } & .50 & 8 \% \\\text { Recession } & .30 & -8 \%\end{array}$

• A)79.36%
• B)83.35%
• C)87.73%
• D)89.23%
• E)90.98%

Recognize the significance of the timing and amount of cash flows in determining the desirability of investments.

Understand the concept of opportunity cost in the context of investment decisions.

Differentiate between annuity due and ordinary annuity.

Understand the definition and application of concepts and prototypes in categorizing objects and ideas.

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Definitions:

Average Total Costs

The total cost of production divided by the quantity of output produced. It reflects the per-unit cost of production.

Physical Capital

Tangible assets that are used in the production process, such as machinery, buildings, and equipment.

Short Run

The short run is a period in economics during which at least one input, such as plant size or capital, is fixed, limiting the business's ability to adjust production levels fully.

Physical Capital

Physical capital encompasses the machinery, equipment, and infrastructure a business uses to produce goods or services, distinct from financial capital or human skills.