The Covariance Between the Returns of a and B Is

question 7

Multiple Choice

The covariance between the returns of A and B is -0.112. The standard deviation of the rates of return is 0.26 for stock A and 0.81 for stock B. The correlation of the rates of return between A and B is the closest to ________.

• A) -1.88
• B) -0.53
• C) 0.53
• D) 1.88

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Definitions:

General Operation

Encompasses the day-to-day activities required for a business or organization to function efficiently.

Preemptive Rights

The right of existing shareholders to purchase new shares before they are offered to the public, to maintain their proportionate ownership.