Suppose That a Stock Portfolio and a Bond Portfolio Have

question 59

Multiple Choice

Suppose that a stock portfolio and a bond portfolio have a zero correlation. This means that ________.

• A) the returns on the stock and bond portfolios tend to move inversely
• B) the returns on the stock and bond portfolios tend to vary independently of each other
• C) the returns on the stock and bond portfolios tend to move together
• D) the covariance of the stock and bond portfolios will be positive

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Definitions:

Gross Profit

The difference between sales revenue and the cost of goods sold, before deducting overheads, taxes, interest, and other expenses.

Income from Operations

Profit generated from a company's regular business operations, excluding deductions of interest and taxes.

Minimum Acceptable Return

The minimum return on an investment that is required by an investor or fund manager, taking into account the risk of the investment.

Divisional Assets

Assets that are specific to, or used by, a particular division within a company.