Which of the Following Is an Assumption of Mean-Variance Analysis

question 19

Multiple Choice

Which of the following is an assumption of mean-variance analysis?

• A)The securities have zero covariance.
• B)There are no arbitrage opportunities.
• C)The securities have either perfect positive or negative correlation.
• D)Financial markets are frictionless.

Recognize the effects of new investments on a company's overall financial performance.

Apply the concepts of ROI and residual income in real-world divisional performance evaluation scenarios.

Understand the concept of residual income and how it's calculated for a division.

Comprehend the return on investment (ROI) metric and its application in evaluating divisional performance.

---

Definitions:

Rifting

The process by which the Earth's crust is stretched and broken apart, leading to the formation of rift valleys and, eventually, new ocean basins.

Mesozoic

The geological era between 252 to 66 million years ago, known for the dominance of dinosaurs.

Paleozoic

An era in Earth's geologic time scale, from about 541 to 252 million years ago, marked by the development of early life.

Subduction Zone

A region of the Earth's crust where tectonic plates converge, and one plate moves under another, often creating volcanic and seismic activity.