The Term Corr $\varepsilon$ _R $\varepsilon$ _T) = 0 Tells Us That:
A) the Error Terms

question 21

Multiple Choice

The term Corr( $\varepsilon$ _R, $\varepsilon$ _T) = 0 tells us that:

• A) the error terms of company R and T are 0.
• B) the unsystematic risk of companies R and T is unrelated or uncorrelated.
• C) the correlation between the returns of companies R and T is greater than zero.
• D) the systematic risk companies R and T is unrelated.

---

Definitions:

Contra Accounts

Accounts used to offset or reduce the balance of another account, usually appearing on the balance sheet.

Merchandiser

A business or person that purchases goods for resale at a profit.

Debit Balances

Accounts on the left side of the double-entry bookkeeping system that typically include assets and expenses, increased by debits.

Adjusted Trial Balance

A statement showing the balances of all accounts, including adjustments, at the end of an accounting period to ensure the total debits equal total credits.