The Correlation Between Stocks a and B Is Equal to the

question 62

Multiple Choice

The correlation between stocks A and B is equal to the

• A)standard deviation of A divided by the standard deviation of B.
• B)covariance_AB divided by the product of the standard deviations of A and B.
• C)standard deviation of B divided by the covariance_AB.
• D)sum of the variances of A and B divided by the covariance_AB.
• E)product of the standard deviation of A multiplied by the standard deviation of B divided by covariance_AB.

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Definitions:

Financial Guarantees Contracts

Contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due.

Derivatives

Financial securities whose value is derived from the value of an underlying asset or benchmark.

AASB 9

The Australian Accounting Standards Board standard covering the classification, measurement, and recognition of financial assets and financial liabilities.

Business Model Test

The asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows.