Use the Information for the Question(s)below

question 32

Multiple Choice

Use the information for the question(s) below.
Suppose you invest $20,000 by purchasing 200 shares of Abbott Labs (ABT) at $50 per share,200 shares of Lowes (LOW) at $30 per share,and 100 shares of Ball Corporation (BLL) at $40 per share.
-Which of the following statements is FALSE?

• A)If two stocks move in opposite directions,one will tend to be above average when to other is below average,and the covariance will be negative.
• B)The correlation between two stocks has the same sign as their covariance,so it has a similar interpretation.
• C)The covariance of a stock with itself is simply its variance.
• D)The covariance allows us to gauge the strength of the relationship between stocks.

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Definitions:

Net Method

An accounting system that records transactions with their net effect, considering any discounts or allowances for prompt payment.

Loan Liability

A financial obligation representing borrowed funds that the borrower is legally required to repay to the creditor, typically with interest.

Foreign Exchange Rate

The rate at which one currency can be exchanged for another, often used in international trade and investment.

Interest

The charge for borrowing money, calculated as a percentage of the amount borrowed.