Multiple choice

Directions: Read the passage/argument and answer the question that follows it.

In the esoteric world of finance, no new idea is complete without its Greek symbol. In the distant past, picking the best stocks was just seen as being clever; now that skill is known as 'alpha'‌. The letter 'beta‌ is for the boring, old style of simply tracking the market. But what if you can find exciting, new markets to track markets that do not move in step with shares or government bonds? That could be extremely valuable. ___________________

Which of the following would complete the above paragraph?

  1. Though it may involve greater risk, it certainly has the potential of generating superior returns over the long term.

  2. It could be more profitable in terms of providing a certain stability and consistency to your overall returns.

  3. Hence the “alternative beta” which refers to non-traditional source of return-based market validity or arbitrage between the spot and futures rates.

  4. But what about “gamma”- the X or zing sector that makes every fund manager or investor a unique animal in the jungle of investment?

Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Option (1) is not factually supported by the paragraph as the paragraph only talks of particular avenues of investment, which may or may not yield some returns. So the question of superior returns or the potential thereof, does not arise at all. Again, option (2) can be similarly ruled out because stability and consistency - these two concerns are hardly addressed by the newer avenues (at least, the paragraph does not support it). Option (4) introduces an interesting, but irrelevant aside in the form of that unknown zing factor. Option (5) represents a possible closing line, but is hardly supported by the contents given in the paragraph. The focus of the paragraph remains on the idea of encoding everything in finance with as symbol. Go back to the first line, the emphasis is on Greek letter. Hence, option (3).