The Correlation Coefficient Between Two Assets Equals to _________

question 84

Multiple Choice

The correlation coefficient between two assets equals to _________.

• A) their covariance divided by the product of their variances
• B) the product of their variances divided by their covariance
• C) the sum of their expected returns divided by their covariance
• D) their covariance divided by the product of their standard deviations

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Definitions:

Marginal Revenue

The additional income received from selling one more unit of a good or service, critical in determining optimal production levels.

Average Variable Cost

The total variable cost divided by the quantity of output produced, indicating the variable cost of producing each unit.

Total Fixed Cost

Total Fixed Cost is the sum of all costs required to produce a product or service that does not change with the volume of output, such as rent, salaries, and equipment maintenance.

Profit-Maximizing Output

The point of production where a company reaches its maximum profit occurs when the marginal revenue is equal to the marginal cost.