An Analyst Has a Two-Factor Model to Forecast the Return

question 10

Multiple Choice

An analyst has a two-factor model to forecast the return for Security B: -2% + 4%(GDP) + 2.5%(IP) . You forecast GDP at 3% and IP at 2% with variances of 4% and 6% respectively. The covariance (GDP, IP) is .4, and the variance of Security B is 125. The variance of the random error term is

• A) 9.8%.
• B) 22.4%.
• C) 17.1%.
• D) 15.5%.

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Definitions:

Marketing Mix

The set of actions, or tactics, that a company uses to promote its brand or product in the market, usually framed as the four Ps: Product, Price, Place, and Promotion.

Product Benefit

The value or advantage that a product offers to the customer, often used in marketing and sales pitches to highlight how it meets needs or solves problems.

Business Proposition Benefit

The advantage or value that a business proposal offers to a potential buyer or investor.

Trial Closings

Sales techniques used to gauge a potential buyer's readiness to complete a purchase by asking hypothetical or suggestive closing questions.