A High Correlation Between Two Variables S and T Indicates

question 64

Multiple Choice

A high correlation between two variables s and t indicates that:

• A)both may be affected by a third variable.
• B)s may cause t,or t may cause s.
• C)the correlation may be due to random chance.
• D)All of these answers are correct.

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Definitions:

Annual Risk-free Rate

The return on investment expected from a risk-free asset over a one-year period.

Futures Price

The agreed price for the future delivery of an asset in a futures contract market.

Spot Exchange Rate

The current exchange rate at which one currency can be traded for another immediately.

Arbitrage

The strategy of exploiting price differences of identical or similar financial instruments across different markets to gain profit with minimal risk.