In a Two-Security Portfolio 25% of Your Money Is Invested

question 8

Multiple Choice

In a two-security portfolio 25% of your money is invested in Security X and the remainder in Security Y.If the standard deviations of Securities X and Y are 22 % and 7 %,respectively,and the portfolio variance is 0.01155625,what is the correlation between the two securities?

• A) -0.003275
• B) 0.03275
• C) 1.0
• D) -1.0

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Definitions:

Indirect Method

A method used in the Statement of Cash Flows to convert net income into net cash flow from operating activities by adjusting for non-cash transactions and changes in working capital.

Net Cash

The remaining amount of cash after all cash expenses have been paid, reflecting a company's true liquidity position.

Decrease in Inventory

A reduction in the quantity or value of inventory, which can indicate higher sales or issues in supply chain and production.

Operating Activities

Business activities related to the day-to-day functions of producing goods, providing services, and selling products.