The Variance of the Rates of Return Is 0

question 120

Multiple Choice

The variance of the rates of return is 0.25 for stock X and 0.01 for stock Y. The covariance between the returns of X and Y is −0.01. The correlation of the rates of return between X and Y is ________.

• A) −0.25
• B) −0.20
• C) 0.20
• D) 0.25

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Definitions:

"S" Corporation

A type of corporation in the United States that meets specific Internal Revenue Code requirements, allowing profits to be taxed only at the shareholder level, not at the corporate level.

Legal Dissolution

The process of legally dissolving a corporation or partnership, effectively ending its existence.

Withdrawal

The act of removing funds from an account, or the act by an owner of taking assets out of a business for personal use.

Total Assets

The sum of all resources owned by a company having economic value, as reported on the balance sheet, including both current and long-term assets.