What Does a High Correlation Coefficient (Either Positive or Negative)

question 107

Multiple Choice

What does a high correlation coefficient (either positive or negative) indicate?

• A)A third factor or variable is responsible for the relationship between the two variables.
• B)A change in one variable causes a change in the second variable.
• C)The scores on the two variables are nearly identical.
• D)There is a high level of consistency in the relationship between the two variables.

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Definitions:

Net Present Value

The calculation used to determine the current worth of a future stream of cash flows, adjusted for the time value of money.

Depreciation Tax Shield

The reduction in income taxes that results from taking a deduction for depreciation on the company's tax return, effectively reducing taxable income.

Cash Outlays

Payments in cash for expenses or investments made by a business or individual.

Auto Leases

Contracts that allow a person to use a car for a set period of time in exchange for regular payments, without owning the vehicle.