In Developing the CAPM, the Relevant Measure of Risk for Each

question 19

Multiple Choice

In developing the CAPM, the relevant measure of risk for each security is its

• A) individual standard deviation.
• B) weight or proportion of the portfolio.
• C) correlation with each alternative security.
• D) covariance with the market portfolio.

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Definitions:

Regression

A defense mechanism in psychology where an individual's behavior reverts to an earlier stage of development, often in response to stressful situations.

Habituation

The diminishing of a physiological or emotional response to a frequently repeated stimulus.

Prosocial Behaviors

Actions intended to benefit others, including helping, sharing, comforting, and showing compassion.

Self-reliant

The ability to depend on oneself for various needs, making one confident in their independence and resourcefulness.