The Correlation Between X and Y
A)cannot Be Negative Since $\frac { \operatorname { cov } ( X , Y ) } { \operatorname { var } ( X ) \operatorname { var } ( Y ) }$

question 8

Multiple Choice

The correlation between X and Y

• A)cannot be negative since variances are always positive.
• B)is the covariance squared.
• C)can be calculated by dividing the covariance between X and Y by the product of the two standard deviations.
• D)is given by corr(X, Y)= \(\frac { \operatorname { cov } ( X , Y ) } { \operatorname { var } ( X ) \operatorname { var } ( Y ) }\)

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Definitions:

Leveraged Firm

A company that uses debt along with equity to finance its assets, often resulting in higher potential returns but also higher risk.

ROE

Return on Equity, a financial ratio indicating the profitability of a corporation in relation to stockholders’ equity, showing how well the company uses investments to generate earnings growth.

EPS

Earnings Per Share, a company's profit divided by the number of outstanding shares of its common stock, indicating the company's profitability.

EBIT

Earnings Before Interest and Taxes, a measure of a company's profit that includes all incomes and expenses except interest and income tax expenses.