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A bond analyst is looking at historical returns for two bonds, Bond 1 and Bond 2. Bond 2’s returns are much more volatile than Bond 1. The variance of returns for Bond 1 is 0.012 and the variance of returns of Bond 2 is 0.308. The correlation between the returns of the two bonds is 0.79, and the covariance is 0.048. If the variance of Bond 1 increases to 0.026 while the variance of Bond B decreases to 0.188 and the covariance remains the same, the correlation between the two bonds will: A. remain the same. B. decrease. C. increase. |