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Why Is Beta Thought to Be a More Relevant Measure

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Why is Beta thought to be a more relevant measure of risk than standard deviation for a diversified investor?


Definitions:

Conservative Financing

A strategy prioritizing lower risk financing options, typically involving higher equity and lower debt levels to minimize insolvency risks.

Long-term Securities

Financial instruments that typically have a maturity period of more than one year and are used to finance longer-term investments.

Temporary Working Capital

The additional working capital needed to support fluctuations in business activity above the normal level.

Capital Requirement

The amount of capital a bank or financial institution must hold to shield against financial risk and comply with regulatory standards.

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