Security X Has a Standard Deviation of Its Error Term

question 51

Multiple Choice

Security X has a standard deviation of its error term of 7% and a beta of 1.4. If the standard deviation of the market is 12%, the total variance for Security X is

• A) 118.
• B) 331.
• C) 80.6.
• D) 213.

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Definitions:

Uncountable Number

A type of set or quantity of mathematical entities that cannot be paired with the natural numbers, indicating an infinite quantity that is not countably infinite.

Random Variable

A numerical variable that reflects the outcomes of an unpredictable event.

Standard Normal Distribution

A normal distribution with a mean of 0 and a standard deviation of 1, used in statistical analysis.

Mean

The average of a set of numbers, calculated by dividing the sum of all the numbers by the count of numbers.