The Basic Practice of Statistics 7th Edition

Published by W. H. Freeman
ISBN 10: 1-46414-253-X
ISBN 13: 978-1-46414-253-6

Chapter 4 - Scatterplots and Correlation - Chapter 4 Exercises - Page 123: 4.37a

Answer

Rachel should invest in small cap stocks.

Work Step by Step

The correlation states how closely related two items are. Rachel wants an investment that doesn't closely track her municipal bonds, so she should invest in the item that has a lower correlation (which is small cap stocks, with a correlation of .21).
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