The Risk Free Rate, Average Returns, Standard Deviations and Betas

question 48

Multiple Choice

The risk free rate, average returns, standard deviations and betas for three funds and the S&P500 are given below.
-If these portfolios are subcomponents which make up part of a well diversified portfolio then portfolio ______ is preferred.

• A) A
• B) B
• C) C
• D) S&P500

---

Definitions:

Normal Distribution

A probability distribution characterized by its symmetry surrounding the mean, demonstrating that data points close to the mean occur more frequently than those at a greater distance.

Degrees Of Freedom

Degrees Of Freedom represent the number of values in the final calculation of a statistic that are free to vary, often determining the shape of various sampling distributions.

Interaction Term

In statistical models, it represents the combined effect of two or more variables on a dependent variable, which is different from the effect of any one variable alone.

ANOVA Table

A table used in analysis of variance that summarizes the sources of variance in the data, including the between-groups variance and within-groups variance, to help determine if there are significant differences between groups.