If the Correlation Between Two Stocks Is -1, the Returns

question 35

Multiple Choice

If the correlation between two stocks is -1, the returns:

• A) generally move in the same direction.
• B) move perfectly opposite one another.
• C) are unrelated to one another as it is <0.
• D) have standard deviations of equal size but opposite signs.

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Definitions:

Restrictive Financial Policy

Policies implemented by firms to control their financial risk, often including tight controls over credit terms and dividend payments.

Premium Prices

Premium prices are higher than average prices charged for products or services, often because of perceived superiority in quality or branding.

Accounts Receivable Financing

A secured short-term loan that involves either the assignment or factoring of receivables.