Two Assets Whose Returns Move in the Same Direction and Have

question 167

True/False

Two assets whose returns move in the same direction and have a correlation coefficient of +1 are very risky assets.

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Definitions:

Optimal Point

The most favorable position or condition that yields the maximum benefit or efficiency in a given situation, such as in investment or production.

Credit Policy

Rules a business adheres to for assessing a customer's eligibility for credit and the stipulations under which it is offered.

Opportunity Cost

The most valuable alternative that is given up if a particular investment is undertaken.

Incremental Cost

The additional cost incurred to produce one more unit of a product or service.