A Stock's Alpha Is Defined as the Stock's

question 53

Multiple Choice

A stock's alpha is defined as the stock's:

• A)expected return minus its required return.
• B)expected return minus its actual return.
• C)nominal return minus its required return.
• D)required return minus its actual return.

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Definitions:

Variance

A measure of the dispersion or spread between numbers in a data set, indicating how much the numbers differ from the mean.

Portfolio Risk

The risk associated with holding a portfolio of investments, reflecting the potential for loss due to market volatility.

Diversified Away

A strategy to reduce risk by allocating investments among various financial instruments, industries, or other categories to avoid overexposure to any single asset or risk.

Market Risk Premium

The additional yield investors anticipate for maintaining a portfolio of risky securities over safe assets.