Sum of market risk and diversifiable risk are classified as total risk which is equivalent to_______________?
Correct answer: D. Variance
- A. Sharpe's alpha
- B. Standard alpha's
- C. Alpha's variance
- D. Variance
Explanation
Total risk combines market risk with diversifiable risk and is commonly measured by the variance of returns, while standard deviation is its square root. The other options are not standard measures of total risk.
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Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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