Consider a Risky Asset That Has a Standard Deviation of Returns

question 1

Multiple Choice

Consider a risky asset that has a standard deviation of returns of 15.Calculate the correlation between the risky asset and a risk free asset.

• A) 1.0
• B) 0.0
• C) -1.0
• D) 0.5
• E) -0.5

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Definitions:

Tax Bracket

A range of incomes taxed at a particular rate, which forms part of a progressive taxation system where tax rates increase with income.

Cost-Cutting

The process of reducing expenses to improve profitability without compromising the core activities of an organization.

Depreciated Straight-Line

A method of allocating the cost of a tangible asset over its useful life, resulting in a consistent expense amount each period.

Pre-tax Salvage Value

The estimated value of an asset at the end of its useful life before taxes are taken into account.