Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

If the correlation coefficient of two assets is zero, what conclusion can be drawn? A. The two assets are positively correlated. B. The two assets

If the correlation coefficient of two assets is zero, what conclusion can be drawn?

A. The two assets are positively correlated.

B. The two assets have an undetermined correlation

C. The two assets are perfectly correlated

D. The two assets are uncorrelated

Stock A has a standard deviation of 22 percent per year and stock B has a standard deviation of 11 percent per year. The correlation between Stock A and Stock B is .30. You have a portfolio of these two stocks wherein stock B has a portfolio weight of 35 percent. What's your portfolio variance?

A. .004218

B. .015312

C. .025235

D. .034682

What can potentially happen to risk when assets are perfectly negatively correlated to each other?

A. It increases by the degree of the correlation.

B. It's unaffected.

C. It can be completely eliminated.

D. It decreases by one half of the degree of the correlation

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Management Core Concepts

Authors: Raymond M Brooks

3rd edition

133866696, 978-0133866698

More Books

Students also viewed these Finance questions