The Convergence Hypothesis

question 249

Multiple Choice

The convergence hypothesis:

• A) apparently applies only to wealthy countries.
• B) seems to hold only when other things such as education and infrastructure are held equal.
• C) suggests that relatively poor countries will continue to be poor regardless of their level of saving.
• D) states that countries' growth depends on the amount of government intervention in the marketplace.

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Definitions:

Stock Beta

A gauge for assessing the risk or volatility inherent in a security or portfolio against the entire market's movements.

Risk-free Interest Rate

The theoretical rate of return of an investment with zero risk of financial loss, often represented by the yield on government bonds.

Two-factor Model

A financial model that considers two sources of risk in its valuation or pricing, typically used in evaluating or predicting financial returns.

Market Risk

The risk of losses due to factors that affect an entire market or asset class, also known as systematic risk, which cannot be eliminated through diversification.