Use the Table for the Question(s)below

question 6

Multiple Choice

Use the table for the question(s) below.
Consider the following covariances between securities:
-Which of the following formulas is INCORRECT?

• A)Variance of an equally Weighted Portfolio = (1 - )(Average Variance of Individual Stocks)+ (Average covariance between the stocks)
• B)Variance of a portfolio =
• C)Variance of a portfolio =
• D)Variance of a portfolio =

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Definitions:

Twin Deficits

Refers to the situation where a country is running both a fiscal deficit (government spending exceeds revenue) and a current account deficit (imports exceed exports).

Budget Deficit

The condition when a government spends more than its income, requiring it to borrow money or accumulate debt to cover the gap.

Trade Deficit

A situation where a country's imports of goods and services exceed its exports, leading to negative balance of trade.

Real Exchange Rate

A measure that adjusts the nominal exchange rate by the relative prices of domestic and foreign goods and services, reflecting the purchasing power of two currencies.