If Two Assets Have a Zero Correlation, Their Returns Will

question 2

Multiple Choice

If two assets have a zero correlation, their returns will:

• A)always move in the same direction by the same amount.
• B)always move in the same direction but not necessarily by the same amount.
• C)move randomly and independently of each other.
• D)always move in opposite directions but not necessarily by the same amount.
• E)always move in opposite directions by the same amount.

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Definitions:

Compound-Interest

A method of calculating interest where the amount is based on the initial principal and the interest that has been accumulated in past periods.

Compounded Quarterly

Involves calculating interest on an investment by adding the accrued interest back into the principal at the end of each quarter, effectively earning interest on interest.

GIC

Guaranteed Investment Certificate, a Canadian investment that offers a guaranteed rate of return over a fixed period, typically without the risk of losing the principal invested.

Investor

An individual or entity that allocates capital with the expectation of receiving financial returns.