If the Correlation Between Two Stocks Is -1,the Returns

question 105

Multiple Choice

If the correlation between two stocks is -1,the returns:

• A)generally move in the same direction.
• B)are unrelated to one another as it is < 0.
• C)move perfectly opposite one another.
• D)have standard deviations of equal size but opposite signs.
• E)None of the above.

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Definitions:

Future Value

Future value is the value of a current asset at a specified date in the future based on an assumed rate of growth over time.

Compounded Monthly

Interest calculation where interest is added to the principal balance each month, leading to an increase in the total interest earned over time.

Ordinary Annuity

A sequence of identical payments made consistently during a defined timeframe.

Compounded Semi-Annually

Interest calculation method where the interest is added to the principal at half-year intervals, leading to an increase in the amount of subsequent interest.