AAFM CWM_LEVEL_2 Exam - Topic 3 Question 110 Discussion

Actual exam question for AAFM's CWM_LEVEL_2 exam

Question #: 110
Topic #: 3

Section A (1 Mark)

The covariance of the market returns with the stocks returns is 0.008. The standard deviation of the market is 8% and standard deviation of stock's return is 11%. What is the correlation coefficient between stocks and market returns?

A0.5

B0.91

D1.25

Show Suggested Answer

Suggested Answer: B

by Keneth at Jan 05, 2026, 05:16 AM

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Glennis

18 days ago

D) 1.25 seems a bit too high, don't you think? I'm going with B) 0.91 as well.

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Pearly

23 days ago

Hmm, I'm not sure about this one. I think it might be C) 1, but I'll have to double-check the calculations.

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Ty

29 days ago

The correlation coefficient is definitely B) 0.91. I remember learning this formula in my finance class.

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Colton

1 month ago

I believe the formula is correlation = covariance divided by the product of the standard deviations. I just need to double-check my calculations!

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Josephine

1 month ago

I’m a bit confused about the options. I know the correlation should be between -1 and 1, so I’m pretty sure D) 1.25 can’t be right.

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Sherita

1 month ago

This question feels familiar; I think we did a similar one in class. I just need to recall the formula correctly.

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Arlyne

2 months ago

I think I remember that the correlation coefficient is calculated using covariance and the standard deviations, but I'm not entirely sure how to set it up.

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Marquetta

2 months ago

Ugh, I'm not sure I even remember how to calculate the correlation coefficient. This is going to take some thinking.

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Nathan

2 months ago

Alright, let's do this. I'm feeling pretty confident about this type of question.

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Valene

2 months ago

Hmm, this seems straightforward enough. I just need to remember the right steps and I should be able to get the right answer.

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Chandra

2 months ago

Wait, what's the formula for correlation coefficient again? I'm a bit fuzzy on that.

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Cammy

3 months ago

Okay, I think I know how to approach this. I just need to plug the values into the formula for correlation coefficient.

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