The Two-Factor Model for Security X Is 3% + L

question 7

Multiple Choice

The two-factor model for Security X is 3% + l.5(GDP) - 2(CPI) and for Security Y is 4% + 2(GDP) - .8(CPI) . An analyst forecasts GDP at 4% and CPI at 5% with respective variances of 8% and 3%. Covariance (GDP, CPI) is .6. The covariance between Securities X and Y is

• A) 25.7.
• B) 28.8.
• C)g.6.
• D) 33.6.

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Definitions:

Bile

A digestive fluid produced by the liver and stored in the gallbladder, helping in the digestion and absorption of fats.

Blood Proteins

Proteins present in blood plasma, including antibodies, albumin, and clotting factors, playing roles in immunity, regulation, and transportation.

Hepatic Portal Vein

The hepatic portal vein is a blood vessel that transports blood from the gastrointestinal tract and spleen to the liver, carrying nutrients and toxins for processing.

Inferior Vena Cava

A large vein that carries deoxygenated blood from the lower and middle parts of the body to the right atrium of the heart.