In a Two-Security Portfolio 25% of Your Money Is Invested

question 25

Multiple Choice

In a two-security portfolio 25% of your money is invested in Security X and the remainder in Security Y.If the standard deviations of Securities X and Y are 22 % and 7 %, respectively, and the portfolio variance is 0.01155625, what is the correlation between the two securities?

• A)-0.003275
• B)0.03275
• C)1.0
• D)-1.0

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Definitions:

Earnings Per Share

A company's net profit divided by the number of its outstanding shares, indicating the profitability of a company on a per-share basis.

Times-Interest-Earned Ratio

A financial metric that measures a company's ability to meet its debt obligations based on its current earnings.

Net Income

The total earnings of a company after all expenses and taxes have been deducted from total revenue.

ROA

Return on Assets, a financial ratio indicating the profitability of a company relative to its total assets.