The Measure of Risk for Pairs of Stocks in a Portfolio

question 5

Multiple Choice

The measure of risk for pairs of stocks in a portfolio selection problem is called:

• A) the covariance of the return.
• B) the variance of the return.
• C) the expected return.
• D) decreasing marginal return.
• E) None of the choices is correct.

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Definitions:

Materials Quantity Variance

The difference between the actual quantity of materials used in production and the expected quantity, which can affect costs.

Actual Price

The real price at which a transaction occurs, as opposed to an estimated or listed price.

Direct Materials

Raw materials that can be directly traced to the production of specific goods or services, reflecting in the cost of goods sold.

Materials Price Variance

The difference between the actual cost and the standard cost of materials used in production.