The Variance of a Portfolio Comprised of Many Securities Is

question 108

Multiple Choice

The variance of a portfolio comprised of many securities is primarily dependent upon the:

• A)variances of the securities held within the portfolio.
• B)beta of the portfolio.
• C)portfolio's correlation with the market.
• D)covariance between the overall portfolio and the market.
• E)covariances between the individual securities.

---

Definitions:

Rate of Return

The net gain or loss on an investment over a specified time period, expressed as a percentage of the investment's initial cost.

Short 1,000 Shares

The act of selling 1,000 shares of a stock that the seller does not own, with the expectation of buying them back at a lower price for a profit.

Repurchase

The act of a company buying back its own shares from the marketplace, which can affect the stock price and shareholder equity.

Initial Margin

The upfront collateral required to open a position in the futures or derivatives market.