A Risky Security Has a Variance of

question 43

Multiple Choice

A risky security has a variance of .036190 and a covariance with the market of .0222.The variance of the market is .01975.What is the correlation of the risky security to the market?

• A).51
• B).65
• C).72
• D).83
• E).85

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Definitions:

Competitive Market

A market structure characterized by a large number of buyers and sellers, free entry and exit, and a homogeneous product, ensuring no single entity can dictate the market price.

Monopolists

Firms or individuals that are the sole providers of a particular good or service, giving them significant market power.

Price Takers

Participants in a market who accept the prevailing market price because they do not have enough power to influence it.

Market

A place or platform where buyers and sellers come together to trade goods, services, or financial instruments.