Anita Cruz Recently Assumed Responsibility for a Large Investment Portfolio $\alpha$

question 4

Multiple Choice

Anita Cruz recently assumed responsibility for a large investment portfolio. She wonders whether industry sector influences investment objective. Her staff prepared the following contingency table from a random sample of 200 common stocks: Using $\alpha$ =.01, appropriate decision is ___.

• A) reject the null hypothesis and conclude the two variables are not independent
• B) reject the null hypothesis and conclude the two variables are independent
• C) do not reject the null hypothesis and conclude the two variables are not independent
• D) do not reject the null hypothesis and conclude the two variables are independent
• E) do nothing

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Definitions:

Beta

An indicator of the level of systematic risk or volatility of a security or a portfolio relative to the entire market.

Total Risk

The complete range of risks associated with an investment, including both systematic risk (market related) and unsystematic risk (company or industry specific).

Standard Deviation

A measure of the dispersion or variability of a set of data points from its mean, often used in finance to gauge investment risk.

Risk Premium

The extra return above the risk-free rate that investors require to compensate them for holding a risky asset.