The Covariance of Two Securities Is

question 53

Multiple Choice

The covariance of two securities is

• A)equal to the variance of one security divided by the variance of the second security.
• B)zero when the securities are positively related.
• C)expressed as a squared value.
• D)limited to a range of 0 to +1.
• E)unaffected by any changes in the probabilities of various states of the economy occurring.

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Definitions:

Demand Elasticity

An assessment of the sensitivity of demand for a product to shifts in its price.

Monopolist Engages

Refers to actions taken by a monopolistic firm to maintain or enhance its market power, which can include setting prices or limiting supply.

Price Discrimination

The strategy of selling the same product to different customers at different prices based on their willingness to pay.

Market Segmentation

The process of dividing a broad consumer or business market, normally consisting of existing and potential customers, into subsets of consumers (known as segments) based on some shared characteristics.