You Own a Stock That Will Produce Varying Rates of Return

question 17

Multiple Choice

You own a stock that will produce varying rates of return based upon the state of the economy.Which one of the following will measure the risk associated with owning that stock?

• A) weighted average return given the multiple states of the economy
• B) rate of return for a given economic state
• C) variance of the returns given the multiple states of the economy
• D) correlation between the returns give the various states of the economy
• E) correlation of the weighted average return as compared to the market

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Definitions:

Ownership Interest

The proportion of a company or property owned by an individual or entity, often represented as a share of equity.

Capital Balances

The amounts of money invested by owners or shareholders in a company, reflecting the net assets owned by the investors.

Profit Sharing

A company policy of distributing a portion of its profits to its employees as a form of bonus or incentive.

Ownership Interest

A stake or share in the ownership of a business or property, representing a claim on its assets and profits.