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.

---

Definitions:

Nonconsenting Third Parties

Individuals or groups affected by a transaction between other parties without their explicit agreement or participation.

Nonexcludable

A characteristic of a good or service that prevents the owner from effectively excluding others from using it, often associated with public goods.

Nonrival-in-consumption

A property of certain goods where one individual's consumption does not diminish the ability of others to consume the same good.

Public Good

An item or service made available to all societal members at no cost, regardless of profit, by either governmental bodies or private individuals or groups.