a. Use the general formula for the variance of a linear combination to write an expression for

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a. Use the general formula for the variance of a linear combination to write an expression for V(aX Y). Then let a sY /sX, and show that r  1. [Hint: Variance is always  0, and Cov(X, Y ) sX  sY  r.]

b. By considering V(aX  Y ), conclude that r  1.

c. Use the fact that V(W) 0 only if W is a constant to show that r 1 only if Y aX b.

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