The Term Corr $\varepsilon$ _R $\varepsilon$ _T )= 0 Tells Us That:
A)all Error Terms of Tells

question 32

Multiple Choice

The term Corr( $\varepsilon$ _R , $\varepsilon$ _T ) = 0 tells us that:

• A)all error terms of company R and T are 0.
• B)the unsystematic risk of companies R and T is unrelated or uncorrelated.
• C)the correlation between the returns of companies R and T is -1.
• D)the systematic risk companies R and T is unrelated.
• E)None of the above.

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Definitions:

Solver

A software tool that finds the optimal solution to a mathematical problem by varying multiple inputs within certain constraints.

Discontinuous

Refers to a function or process that exhibits breaks, jumps, or gaps in its domain or range.

Integer Linear Optimization Models

Mathematical models used in operations research that seek to maximize or minimize a linear objective function subject to a set of linear constraints and integer variables.

Nonlinear Optimization Models

Mathematical models dealing with optimization problems where the objective function or any of the constraints are nonlinear.