The Correlation Between a and B Is

question 214

Multiple Choice

The correlation between A and B is +.60; the correlation between C and D is -.75. What do we know about causation based on the above?

• A) We know A causes B, but we don't know if C causes D.
• B) We know C causes D, but we don't know if A causes B.
• C) We know A causes B AND that D causes C.
• D) We don't know anything about causation from the information above.

Understand the rationale behind equity as an option on the firm's assets and the implications of exercising such options.

Learn about factors affecting the value of options and how to calculate option pricing using models.

Identify the differences and the comparison between American and European options.

Understand the financial strategies involving options and bonds, including employee stock options (ESO), warrants, and callable bonds.

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Definitions:

Nominal Interest Rate

The stated interest rate on a loan or investment, not adjusted for inflation.

Loanable Funds

The money available for borrowing; the market where savers supply funds for loans to borrowers.

Supply

A relation between the price of a good and the quantity that producers are willing and able to sell per period, other things constant.

Demand

Refers to the quantity of a good or service that consumers are willing and able to purchase at various price levels over a given period of time.