The Direction of a Correlation Is Indicated By

question 4

Multiple Choice

The direction of a correlation is indicated by:

• A)its sign (+ or - ).
• B)its numerical value.
• C)both a and b
• D)none of the above

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Definitions:

Par Value

Par value is the nominal or face value of a bond, share of stock, or coupon as indicated on a bond or stock certificate.

Cost of Equity

The return that investors expect for investing in a company's equity, often calculated by the Capital Asset Pricing Model (CAPM).

Market Risk Premium

The additional return expected by investors for taking on the higher risk of investing in the stock market over a risk-free investment.

Overall Beta

A measure of the volatility, or systematic risk, of a portfolio in comparison to the market as a whole.