In Practice Which Market Index Is Most Widely Used as a Proxy

question 9

Multiple Choice

In practice which market index is most widely used as a proxy for the Canada market portfolio in the CAPM?

• A) Dow Jones Industrial Average
• B) Wilshire 5000
• C) S&P/TSX Composite Index
• D) Canadian Treasury Bill

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Definitions:

Protective Put

An investment strategy that involves buying put options on stocks that are already owned to hedge against potential declines in the value of those stocks.

Downside Risk

Refers to the potential loss in value of an investment or asset if the market conditions deteriorate.

Put Option

A financial contract that gives the holder the right, but not the obligation, to sell a specified amount of an underlying asset at a set price within a specified time.

Sell Shares

The act of offloading equity stakes in a company, usually in the form of stock, to raise capital or realize gains from investment.