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Question 2 ( Which of the following is a FALSE statement of the correlation coefficient? Positive correlation coefficients imply that the returns on Security A tend to move in the same direction as those on security B The closer the absolute value of the correlation coefficient is to one, the weaker the relationship between the returns on the two securities Negative correlation coefficients imply that the returns on Security A tend to move in the opposite direction to those on security B It measures how security returns move in relation to one another. Question 3 If you purchase a five-year, zero-coupon bond ($1,000 maturity value) for $500, how much could it be sold for three years later if interest rates have remained stable? $800.00 $757.86

Question 2 ( Which of the following is a FALSE statement of the correlation coefficient? Positive correlation coefficients imply that the returns on Security A tend to move in the same direction as those on security B The closer the absolute value of the correlation coefficient is to one, the weaker the relationship between the returns on the two securities Negative correlation coefficients imply that the returns on Security A tend to move in the opposite direction to those on security B It measures how security returns move in relation to one another. Question 3 If you purchase a five-year, zero-coupon bond ($1,000 maturity value) for $500, how much could it be sold for three years later if interest rates have remained stable? $800.00 $757.86

Corporate Fin Focused Approach
Corporate Fin Focused Approach
5th Edition
ISBN:9781285660516
Author:EHRHARDT
Publisher:EHRHARDT
Chapter6: Risk And Return
Section: Chapter Questions
Problem 1Q
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Question 2 ( Which of the following is a FALSE statement of the correlation coefficient? Positive correlation coefficients imply that the returns on Security A tend to move in the same direction as those on security B The closer the absolute value of the correlation coefficient is to one, the weaker the relationship between the returns on the two securities Negative correlation coefficients imply that the returns on Security A tend to move in the opposite direction to those on security B It measures how security returns move in relation to one another. Question 3 If you purchase a five-year, zero-coupon bond ($1,000 maturity value) for $500, how much could it be sold for three years later if interest rates have remained stable? $800.00 $757.86
Transcribed Image Text:Question 2 ( Which of the following is a FALSE statement of the correlation coefficient? Positive correlation coefficients imply that the returns on Security A tend to move in the same direction as those on security B The closer the absolute value of the correlation coefficient is to one, the weaker the relationship between the returns on the two securities Negative correlation coefficients imply that the returns on Security A tend to move in the opposite direction to those on security B It measures how security returns move in relation to one another. Question 3 If you purchase a five-year, zero-coupon bond ($1,000 maturity value) for $500, how much could it be sold for three years later if interest rates have remained stable? $800.00 $757.86
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