If the index model is valid, _________ would be helpful in determining the covariance between assets HPQ and KMP. A) β_HPQ B) β_KMP C) σ_M D) all of the options E) None of the options are correct.

Question

Quizplus · Accepted Answer

The index model suggests that the covariance between two assets can be determined by their individual betas (β) with respect to the market. Since all the options (A, B, C) involve parameters that are part of the index model framework (such as betas and market variance), they could all be helpful in determining the covariance between assets HPQ and KMP.

If the Index Model Is Valid, _________ Would Be Helpful