Two Assets Whose Returns Move in the Opposite Directions and Have

question 148

True/False

Two assets whose returns move in the opposite directions and have a correlation coefficient of -1 are either risk-free assets or low-risk assets.

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Definitions:

Capital Budgeting

The process of planning and evaluating expenditures on assets whose cash flows are expected to extend beyond one year, like new machinery, equipment, or projects.

Automated Equipment

Machinery and tools that operate with minimal human intervention, often using technology to perform tasks.

Intangible Benefits

Non-monetary advantages of an action or investment, such as improved employee satisfaction or brand loyalty, which are difficult to quantify.

Discount Rate

The interest rate used to discount future cash flows to their present value, reflecting the opportunity cost of capital.