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:

Financial Measures

Quantitative metrics used to gauge a company's performance, financial health, and results over a specific period.

Income Statements

Financial statements that summarize a company's revenue, expenses, and profits over a specific period of time.

Standard Cost

A predetermined cost of manufacturing, delivering, or producing goods or services under normal conditions.

Variance Accounts

Financial accounts used to record the differences between planned and actual figures in budgeting and accounting.