Which Two of the Following Determine How Sensitive a Security

question 74

Multiple Choice

Which two of the following determine how sensitive a security is relative to movements in the overall market?
I. the standard deviation of the security
II. correlation between the security's return and the market return
III. the volatility of the security relative to the market
IV. the amount of unsystematic risk inherent in the security

• A)I and III only
• B)I and IV only
• C)II and III only
• D)II and IV only
• E)III and IV only

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Definitions:

Return

The profit or loss generated from an investment over a certain period of time.

Compounded Annually

A compound interest calculation made once per year.

Economic Equivalent

A theoretical figure representing the total cost or value of an asset, taking into account factors like inflation, interest rates, and opportunity cost.

Payment Stream

A series of payments made over time between parties in a financial transaction, such as annuities, mortgages, and dividends.