The Covariance Between the Returns on Two Assets Is Negative

question 8

Multiple Choice

The covariance between the returns on two assets is negative. This occurs when ________.

• A) the variance of one asset has a negative linear relationship with the variance of the other asset
• B) the standard deviation of one asset has a positive linear relationship with the standard deviation of the other asset
• C) on average, the return on one asset is below its expected value and the return on the other asset is above its expected value
• D) on average, the return on one asset is below its expected value and the return on the other asset is below its expected value

---

Definitions:

Consideration Given

The value (such as money, service, or goods) promised in a contract to persuade a party to agree to the contract.

Minor's Contract

An agreement entered into by a person under the age of legal competence, which renders the contract voidable at the option of the minor.

Disaffirm

The act of denying, rejecting, or declaring a contract or agreement void, typically used in legal contexts where an individual wants to nullify an agreement.

Adjudicated Insane

This term refers to a legal determination that an individual is not mentally competent to manage their affairs or stand trial, based on evidence and expert testimony.