To Find the Variance Between Two Securities Using a Two-Factor

question 22

Multiple Choice

To find the variance between two securities using a two-factor model, an analyst does not need

• A) the sensitivity of each security to each factor.
• B) the year factor value.
• C) the variance of Factor 1
• D) the covariance (F1, F2).

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Definitions:

Network

A group of interconnected people or systems working together or exchanging information.

Disciplined

Exhibiting behavior that is controlled and orderly, often due to training or practice.

Resistance to Change

The reluctance or opposition to adapt to new methods, processes, or changes within an organization or personal life.

Boiled Frog Syndrome

A metaphor for the failure to react to significant changes that occur gradually.