For a One-Factor Model, an Analyst Finds the Variance of the Factor

question 12

Multiple Choice

For a one-factor model, an analyst finds the variance of the factor is 6 and the variance of the random error is 10. If the total variance for the security is 106, its sensitivity to the factor is

• A) 2.
• B) 5.
• C) 6.
• D) 4.

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Definitions:

Exit Strategy

A planned approach to exiting a business venture, typically to realize a profit or limit losses.

Fast-growth Businesses

Companies that experience significantly higher than average rates of growth in revenue, size, or market share over a short period.

Outside Investors

Individuals or entities that invest capital into a business or project in which they do not have an active management role.

Profitable

Generating more revenue than the expenses incurred, resulting in a financial gain for the business.