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Based on the outcomes in the following table, choose which of the statements below is (are) correct? Security A Security B Security C Return > E(r) Return < E(r) Return = E(r) Return E(r) Return E(r) E(r) Return < E(r) Return > E(r) Scenario Recession Normal Boom Return = Return = E(r) 1. The covariance of security A and security B is zero. II. The correlation coefficient between securities A and B is negative. III. The correlation coefficient between securities B and C is positive. IV. The correlation coefficient between securities B and C is zero.

Based on the outcomes in the following table, choose which of the statements below is (are) correct? Security A Security B Security C Return > E(r) Return < E(r) Return = E(r) Return E(r) Return E(r) E(r) Return < E(r) Return > E(r) Scenario Recession Normal Boom Return = Return = E(r) 1. The covariance of security A and security B is zero. II. The correlation coefficient between securities A and B is negative. III. The correlation coefficient between securities B and C is positive. IV. The correlation coefficient between securities B and C is zero.

Entrepreneurial Finance
Entrepreneurial Finance
6th Edition
ISBN:9781337635653
Author:Leach
Publisher:Leach
Chapter4: Preparing And Using Financial Statements
Section: Chapter Questions
Problem 16DQ
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Please show complete steps nd correct. Also why other are incorrect. It is a multiple correct mcq
Based on the outcomes in the following table, choose which of the statements below is (are) correct? Security A Security B Security C Return > E(r) Return ‹ E(r) Return = E(r) Return = E(r) Return = E(r) E(r) Return < E(r) Return › E(r) Return = E(r) Scenario Recession Normal Boom Return = 1. The covariance of security A and security B is zero. II. The correlation coefficient between securities A and B is negative. III. The correlation coefficient between securities B and C is positive. IV. The correlation coefficient between securities B and C is zero.
Transcribed Image Text:Based on the outcomes in the following table, choose which of the statements below is (are) correct? Security A Security B Security C Return > E(r) Return ‹ E(r) Return = E(r) Return = E(r) Return = E(r) E(r) Return < E(r) Return › E(r) Return = E(r) Scenario Recession Normal Boom Return = 1. The covariance of security A and security B is zero. II. The correlation coefficient between securities A and B is negative. III. The correlation coefficient between securities B and C is positive. IV. The correlation coefficient between securities B and C is zero.
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