If the Correlation Between Two Stocks Is −1,the Returns on the Stocks

question 69

Multiple Choice

If the correlation between two stocks is −1,the returns on the stocks:

• A)generally move in the same direction.
• B)move perfectly opposite to one another.
• C)are unrelated to one another.
• D)have standard deviations of equal size but opposite signs.
• E)totally offset each other producing a rate of return of zero.

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Definitions:

Negotiates

The process of discussing something to reach an agreement, especially in a business or political context.

Sue

To initiate legal proceedings against a person or entity.

Loan

A sum of money borrowed from a lender that is expected to be paid back with interest.

Materially Altered

Refers to significant modifications made to a document or object that change its original condition or purpose.