Use the Table for the Question(s) Below

question 64

Multiple Choice

Use the table for the question(s) below.
Consider the following expected returns, volatilities, and correlations:

-Which of the following combinations of two stocks would give you the biggest reduction in risk?

• A) Duke Energy and Wal-Mart
• B) Wal-Mart and Microsoft
• C) Microsoft and Duke Energy
• D) No combination will reduce risk.

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Definitions:

Interest Expense

The cost incurred by an entity for borrowed funds; it represents the interest payable on any borrowings - bonds, loans, convertible debt, or lines of credit.

Sales Over Cost

It refers to the ratio or difference between the sales generated and the cost of the goods sold, aimed at measuring profitability.

Gross Profit

The income a firm generates once it subtracts the expenses involved in the production and sale of its goods, or the expenses incurred from offering its services.