If the Covariance Between Two Stocks Is 115 and the Standard

question 33

Multiple Choice

If the covariance between two stocks is 115 and the standard deviation of both stocks are 17 and -8 respectively, what is the Correlation Coefficient between the two stocks?

• A) 0.18
• B) 0.85
• C) -0.85
• D) There is not enough information to calculate the Correlation Coefficient.

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Definitions:

Fixed Costs

Expenses that do not change with the level of goods or services produced by a business over a certain period.

Net Income

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

Sales

The revenue generated from goods or services sold by a company in the ordinary course of its business.

Contribution Margin

The amount remaining from sales revenue after variable expenses are deducted; it contributes towards covering fixed costs and generating profit.