Q:
The covariance between Stock A and Stock Z is 10.32, while the correlation coefficient between the two stocks is -0.35. If the variance to Stock Z is 58, which of the following would best describe the total risk that's inherent in Stock A.
A) It can't be determined since erroneous data has been provided.
B) 3.87%
C) -3.87%
D) -0.51%
A:
The correct answer is: A)
COVA,Z = rA,ZsAsZNote: Since s can never be negative, COVA,Z and rA,Z must always have the same sign. (ie., if one is positive then the other must be positive as well).
Therefore, the data was erroneous.

RELATED FAQS

  1. A church that a registered representative (RR) attends plans to raise the funds necessary ...

    The correct answer is c) Although church bonds are normally considered to be exempt securities, the RR is obligated, by NASD ...
  2. Which of the following statements is (are) true with respect to the calculation of ...

    The correct answer is: a) (I) is incorrect because results that cover a period of less than a year must "not" be annualized. ...
  3. Which of the following terms are associated with the purchase/redemption of open-end ...

    The correct answer is b. Forward pricing is the SEC Rule that requires all transactions in open-end investment company shares ...
  4. Joanne Bume, CFA, is the head of research at large brokerage firm ...

    The correct answer is: a) The proper course of action would simply be to place Universal Airlines on a restricted list until ...
RELATED TERMS
  1. No results found.

You May Also Like

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!