1. A negative covariance between the returns of Stock A and Stock B indicates that
A. market prices of Stock A and Stock B move in tandem when their returns are declining.
B. the return on one stock will exceed that stock's average return when the second stock has a return that is less than its average.
C. a portfolio investing equally in Stocks A and B will have a negative expected rate of return.
D. both Stock A and Stock B have negative rates of return for the period.
E. one stock has a negative rate of return while the other stock has a positive rate of return for the period.
2. Assume a project has normal cash flows and a positive (non-zero. net present value. The project's
A. profitability index will be less than 1.
B. internal rate of return will exceed its required rate of return.
C. costs exceed its benefits.
D. discounted payback period will exceed the life of the project.
E. payback period must equal the life of the project.