Returns on an Investor's Stock Portfolio (N = 19 Stocks)

question 25

Multiple Choice

Returns on an investor's stock portfolio (n = 19 stocks) are compared for the same stock in each of two consecutive quarters. Since the returns are not normally distributed (normality test p-values were .005 and .126 respectively) , a nonparametric test was chosen. The test results are shown below. Spearman Rank Correlation

$\begin{array}{|r|r|r|}\hline&\text { Qtr1 }&\text { Qtr2}\\\hline \text { Qtr1 }&1.000 & \\\hline \text { Qtr2 }&.577 & 1.000 \\\hline\end{array}$

19 sample size
$\pm .456$ critical value .05 (two-tail)
$\pm .575$ critical value .01 (two-tail) Which is the best conclusion?

• A)The returns are correlated neither at ? = .05 nor at ? = .01.
• B)The returns are correlated at ? = .05 but not at ? = .01.
• C)The returns are correlated at ? = .01 but not at ? = .05.
• D)The returns are correlated both at ? = .05 and at ? = .01.

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Definitions:

Sufficient Cash

Adequate monetary resources available to a business for meeting immediate and short-term obligations.

Stock Dividends Distributable

A portion of retained earnings that has been declared as a dividend to be paid in the form of additional shares of the company's stock rather than cash.

Current Liability

Financial obligations that a company is expected to settle within one year or within its operating cycle, whichever is longer.

Public Corporation

A company whose shares are traded freely on a stock exchange, owned by public investors, and subject to specific disclosure and regulatory requirements.