What Is the Difference Between a Correlation Equal to -1

question 8

Multiple Choice

What is the difference between a correlation equal to -1 and a correlation equal to 0?

• A)A correlation equal to -1 means two alternatives are moving in the same direction, whereas a correlation of 0 means they are moving in opposite directions.
• B)A correlation equal to -1 means two alternatives are moving in the same direction, whereas a correlation of 0 means they are unrelated.
• C)A correlation equal to -1 means two alternatives are moving in opposite directions, whereas a correlation of 0 means they are moving in the same direction.
• D)A correlation equal to -1 means two alternatives are moving in opposite directions, whereas a correlation of 0 means they are unrelated.

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Definitions:

Incremental Borrowing Rate

The interest rate a lessee would have to pay if, instead of leasing, they financed the purchase of an asset with a loan over a similar term.

Implicit Rate Of Interest

The interest rate embedded in a lease agreement, used to calculate the present value of lease payments and to establish the lease classification.

Present Value

The current worth of a future sum of money or stream of cash flows, given a specified rate of return or discount rate.

Lease Capitalization

The process of recording a lease as an asset and a corresponding liability on the balance sheet, reflecting the company's right to use an asset and obligation to make lease payments.