Under the CMT, the Relevant Risk to Consider with Any

question 34

Multiple Choice

Under the CMT, the relevant risk to consider with any security is:

• A) its correlation with other securities in the portfolio.
• B) its covariance with the market portfolio.
• C) its deviation from the portfolio required rate of return.
• D) its variance from the risk-free rate of return.

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Definitions:

Merchandising Company

A business that purchases finished goods for resale, aiming to make a profit without changing the form of the goods.

Cost of Goods Sold

The direct costs related to the production of the goods that a company sells, including materials and labor.

Indirect Manufacturing Cost

Costs that are not directly traceable to specific units produced, such as utilities or rent for manufacturing facilities.

Relevant Range

The scope of activity within which the assumptions about fixed and variable cost behaviors hold true.