On the Basis of Regression Equation We Can Decompose

question 43

Multiple Choice

On the basis of regression Equation we can decompose the variability of the dollar value of the asset, Var(P) , into two separate components Var(P) = b² × Var(S) + Var(e) . The second term in the right-hand side of the equation, Var(e) represents.

• A)the part of the variability of the dollar value of the asset that is related to random changes in the exchange rate.
• B)captures the residual part of the dollar value variability that is independent of exchange rate movements.
• C)none of the above

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Definitions:

Expected Rate

An anticipated return on investment, interest rate, or growth rate based on historical data, market analysis, or other predictive models.

Probability

This refers to the likelihood of occurrence of an uncertain event, often expressed as a number between 0 and 1.

Narrowest Bell Curve

Describes a distribution with a high peak and steep sides, indicating that the data points cluster closely around the mean, showing low variability.

Large-company Stocks

Equities issued by corporations with a large market capitalization, often considered more stable investments than those of smaller companies.