The Correlation Between a Stock and the Market Is 0

question 14

Multiple Choice

The correlation between a stock and the market is 0.48. The standard deviation of the stock is 41 percent, and the standard deviation of the market is 23 percent. What is the beta of the stock?

• A) 0.27
• B) 0.58
• C) 0.86
• D) 0.71
• E) 0.49

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Definitions:

Top-Down Approach

A decision-making process that starts at the highest level of an organization and cascades down to lower levels; also, a method of analysis that begins with a macro overview before drilling down into specifics.

Operating Cash Flow

The cash generated by a company's normal business operations, indicating whether a company is able to generate sufficient positive cash flow to maintain and grow its operations.

Cash Expenses

These are expenses that require an immediate outlay of cash by the business.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision, a fundamental concept in economics and financial decision-making.