In the Above Question,F₁ F_2, and F₃ Were Reasonably Accurate

question 11

Multiple Choice

In the above question,F₁ F_2, and F₃ were reasonably accurate estimates based on previous analysis and F₄ was not.Empirical data showed that the return on security A was actually 24.50%.What is a reasonable estimate for F4? (Assume reasonable values for n₁,n₂,n₃,and n₄)

• A) 27.11%
• B) 33.33%
• C) 31.25%
• D) 40.37%

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Definitions:

Portfolio Variance

A measure of the dispersion of returns of a portfolio, representing the risk inherent in holding a portfolio of multiple assets.

Cyclical Stock

Stocks whose prices are affected by macroeconomic or systemic changes in the overall economy, usually exhibiting high volatility in line with the business cycle.

Countercyclical Stock

A stock whose performance is inversely related to the economy's performance, often doing well during economic downturns.

U.S. Treasury Bills

Short-term government securities issued at a discount from par value and mature in a year or less, representing a secure debt obligation of the US government.