The Beta of a Security Is Calculated by Dividing the

question 3

Multiple Choice

The beta of a security is calculated by dividing the

• A)variance of the market by the covariance of the security with the market.
• B)correlation of the security with the market by the variance of the security.
• C)variance of the market by the correlation of the security with the market.
• D)covariance of the security with the market by the variance of the market.
• E)covariance of the security with the market by the variance of the security.

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Definitions:

Acquisition Differential

The difference between the cost of acquiring a company and the fair value of its identifiable net assets.

Equity Method

An accounting technique used to record the investments in other companies, where the investment is significant but the investor does not have full control.

Patent

A legal right granted to an inventor for an exclusive period, typically 20 years, to exploit a new, useful, and non-obvious invention.

Consolidated Cash Flows

A statement merging the cash flows of a parent company and its subsidiaries to present the overall cash generated or used by the entire group.