Which One of the Following Correlation Relationships Has the Potential

question 35

Multiple Choice

Which one of the following correlation relationships has the potential to completely eliminate risk?

• A)perfectly positive
• B)positive
• C)negative
• D)perfectly negative
• E)uncorrelated

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Definitions:

Loss On Bond Retirement

A financial loss that occurs when a bond is redeemed before its maturity date and the redemption value exceeds its carrying value.

Interest Payable

A liability account showing the amount of interest expense that has been incurred but not yet paid as of the balance sheet date.

Effective Interest Method

A technique used in accounting to allocate interest expense or income over the life of a financial instrument at a constant interest rate.

Semiannually

Occurring twice a year, typically every six months.