A Risky Security Has a Variance of

question 14

Multiple Choice

A risky security has a variance of .035109 and a covariance with the market of .0222. The variance of the market is .019538. What is the correlation of the risky security to the market?

• A) .51
• B) .65
• C) .72
• D) .82
• E) .85

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Definitions:

Variable Costs

Expenses that change in proportion to the activity or volume of operations in a business.

Fixed Costs

Fixed charges that are unaffected by changes in production volume, including rental fees and payrolls.

Variable Cost Curve

The variable cost curve shows the relationship between total variable cost and the level of a firm's output, demonstrating how costs fluctuate with changes in production.

Factor Prices

The prices paid for the use of factors of production such as land, labor, and capital, which influence cost of production and economic decisions.