A Negative Covariance Between the Returns of Stock a and Stock

question 49

Multiple Choice

A negative covariance between the returns of Stock A and Stock B indicates that

• A)market prices of Stock A and Stock B move in tandem when their returns are declining.
• B)the return on one stock will exceed that stock's average return when the second stock has a return that is less than its average.
• C)a portfolio investing equally in Stocks A and B will have a negative expected rate of return.
• D)both Stock A and Stock B have negative rates of return for the period.
• E)one stock has a negative rate of return while the other stock has a positive rate of return for the period.

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Definitions:

Few Persons

A term not widely used in a specific financial or legal context; generally, it refers broadly to a small number of individuals.

Commingles

The act of mixing or combining funds or properties in a way that makes them indistinguishable from one another.

Corporate Interests

The concerns, objectives, or priorities of a corporation, often related to profitability, growth, and protecting the company's market position.

Debts

Money owed by one party to another under an agreement to repay borrowed funds or services.