A Measure That Correlates with Other Measures as It Should

question 36

Multiple Choice

A measure that correlates with other measures as it should has

• A)convergent validity.
• B)discriminant validity.
• C)interitem validity.
• D)concurrent validity.

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Definitions:

Expected Return

The weighted average of all possible returns for a given investment, where the weights are the probabilities of each outcome, representing an anticipation of gains on an asset.

Market Risk Premium

The additional return over the risk-free rate that investors require to compensate them for the extra risk of investing in the stock market.

Fairly Priced

A term suggesting an asset is trading at a price close to its intrinsic value, considering its earnings, growth potential, and risk.

Expected Return

The predicted amount of profit or loss an investment generates based on historical or projected performance.