The Beta of a Security Is Calculated by Dividing the

question 3

Multiple Choice

The beta of a security is calculated by dividing the

• A)variance of the market by the covariance of the security with the market.
• B)correlation of the security with the market by the variance of the security.
• C)variance of the market by the correlation of the security with the market.
• D)covariance of the security with the market by the variance of the market.
• E)covariance of the security with the market by the variance of the security.

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Definitions:

RRSP

Registered Retirement Savings Plan, a Canadian financial vehicle for individuals to save for retirement on a tax-sheltered basis.

Nominal Rate

The advertised or stated interest rate on a loan or investment, not accounting for any fees or compounding of interest.

Effective Rate

The real interest rate on an investment or loan, taking into account the effect of compounding over a given period.

Compounding Interval

The frequency at which interest is added to the principal amount of an investment or loan which can affect the total interest earned or paid.