Which of the Following Statements Is FALSE

question 104

Multiple Choice

Which of the following statements is FALSE?

• A) While the sign of a correlation is easy to interpret, its magnitude is not.
• B) Independent risks are uncorrelated.
• C) When the covariance equals 0, the returns are uncorrelated.
• D) To find the risk of a portfolio, we need to know more than the risk and return of the component stocks; we need to know the degree to which the stocks' returns move together.

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Definitions:

Liability

A company’s or individual’s legal financial debts or obligations that arise during the course of business operations.

Percentage Method

An IRS method for calculating the amount of taxes to withhold from an employee's paycheck based on income brackets.

Federal Income Tax

An annual charge imposed by the U.S. government on the income of individuals, businesses, trusts, and various legal bodies.

Exemptions

Deductions allowed by tax authorities on a taxpayer's income, often based on the number of dependents, reducing the taxable income.