The Covariance Between the Returns on Two Assets Is Negative

question 8

Multiple Choice

The covariance between the returns on two assets is negative. This occurs when ________.

• A) the variance of one asset has a negative linear relationship with the variance of the other asset
• B) the standard deviation of one asset has a positive linear relationship with the standard deviation of the other asset
• C) on average, the return on one asset is below its expected value and the return on the other asset is above its expected value
• D) on average, the return on one asset is below its expected value and the return on the other asset is below its expected value

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Definitions:

Asymmetric Carbons

Carbon atoms bonded to four different groups, creating a chiral center and leading to possible optical isomerism.

Fischer Projection

A two-dimensional representation of a 3D organic molecule by projection, depicting stereochemistry at chiral centers.

Stereochemical Relationship

The relative spatial arrangement of atoms within molecules that dictates their chemical behavior and reactions, focusing on how these relationships affect molecular properties.

Fischer Notation

A method used to represent the three-dimensional structure of molecules using two-dimensional projections, particularly sugars.