In Creating the T² Measure One Mixes P* and T-Bills

question 46

Multiple Choice

In creating the T² measure one mixes P* and T-bills to match the _____ of the market and in creating the M² measure one mixes P* and T-bills to match the _____ of the market.

• A) alpha; beta
• B) beta; alpha
• C) beta; standard deviation
• D) standard deviation; beta

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Definitions:

Annual Rate

The interest rate for a period of one year, often expressed as an annual percentage rate.

Compounded Quarterly

This is the procedure of determining interest by adding it to the original investment amount as well as the previously accumulated interest, performed every quarter.

Semi-Annual Period

A six-month time frame or duration, often used in the context of payments, compounding interest, or reporting intervals.

Compounded Monthly

Refers to the calculation of interest added to the principal of a deposit or loan based on a monthly cycle.