n NISM Certifications
X NISM Series X
Medium

For a portfolio consisting of five securities, how many covariance terms are involved in risk calculation?

Practice question from NISM Series XA- Investment Adviser (Level 1) Mock Test 4 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. A

    5

  2. 10

    Correct answer

  3. C

    15

  4. D

    20

Why this is the answer

The number of covariance terms = (n^2 – n)/2 = (25 – 5)/2 = 10.

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