1. The correlation between Stocks A and B is computed as the:
a. Covariance between A and B divided by the standard deviation of A times the standard deviation of B.
b. Standard deviation A divided by the standard deviation of B.
c. Standard deviation of AB divided by the covariance between A and B.
d. Variance of A plus the variance of B divided by the covariance of AB.
e. Square root of the covariance of AB.
2. As part of an unexpected news announcement, Alpha Co. stated that it is increasing its annual dividend from $1.04 per share to $1.10 per share. What else must the company have also announced if its stock price and total expected return remained constant following this announcement? Assume none of the announcement information was previously expected by the market.
a. The firm is planning a new period of rapid growth.
b. The firm will continue to pays it dividend on an annual basis.
c. The growth rate would be less than expected.
d. The growth would be more than expected.
e. Nothing would change.