The Covariance Between the Returns of Stock a and Stock

question 6

Multiple Choice

The covariance between the returns of stock A and stock B is -125. The standard deviation of the rates of return is 20 for stock A and 10 for stock B. The correlation coefficient of the rates of return between A and B is closest to ________.

• A) -0.625
• B) -0.375
• C) 0.375
• D) 0.625

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Definitions:

Utilitarian

Pertaining to the ethical theory that the best action is the one that maximizes utility, usually defined as maximizing happiness and reducing suffering.

Morally Acceptable

Actions or decisions that are considered right or ethical according to a moral code or ethical standards.

Advance Directive

A legal document allowing individuals to outline their preferences for medical treatment in the event they become unable to communicate their decisions.

Living Will

A legal document that specifies an individual's preferences regarding medical treatments in situations where they are unable to communicate their wishes, especially concerning end-of-life care.