If the correlation of prices between two stocks is 0.35, then the price of one stock would beexpected to:O rise by 35% when the other stock price is unchanged.fall by 35% when the other stock price is unchangedfall when the other stock price falls.rise when the other stock price falls

Correlation is the measure of the extend to which two different variable are related and measures…

If the correlation of prices between two stocks is 0.35, then the price of one stock would be expected to: rise by 35% when the other stock price is unchanged. O fall by 35% when the other stock price is unchanged O fall when the other stock price falls. rise when the other stock price falls

If the correlation of prices between two stocks is 0.35, then the price of one stock would be expected to: rise by 35% when the other stock price is unchanged. O fall by 35% when the other stock price is unchanged O fall when the other stock price falls. rise when the other stock price falls

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter2: Risk And Return: Part I

Section: Chapter Questions

Problem 12P: Stock R has a beta of 1.5, Stock S has a beta of 0.75, the expected rate of return on an average...

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Concept explainers

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.

Question

If the correlation of prices between two stocks is 0.35, then the price of one stock would be
expected to:
O rise by 35% when the other stock price is unchanged.
fall by 35% when the other stock price is unchanged
fall when the other stock price falls.
rise when the other stock price falls

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