Which of the Following Is a Reason for Beta Being

question 10

Multiple Choice

Which of the following is a reason for beta being considered as a relevant measure risk,instead of variance?

• A)The marginal variance determines the incremental risk from adding a small amount of the investment to the portfolio.
• B)The total variance determines the incremental risk from adding a small amount of the investment to the portfolio.
• C)The total variance of the asset added determines the total risk of the portfolio.
• D)The marginal risk of the portfolio is unaffected by the variance in the returns of the individual assets in the portfolio.

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Definitions:

Earners

Individuals or entities that receive income through work or investments.

Marginal Tax Rates

The tax rate that applies to each additional dollar of income.

High-Income Taxpayers

Individuals who earn income above a certain threshold and are often subject to higher tax rates or additional taxes.

Borrows Funds

The act of obtaining a certain amount of money from another party, usually financial institutions, under the condition of returning it in the future, often with interest.