There are three possible states of the economy during the next year (states 1, 2, and 3).

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There are three possible states of the economy during the next year (states 1, 2, and 3). The probability of each state of the economy, as well as the percentage annual return on IBM and Disney stocks, are as shown in Table 5.36.

a. Find the correlation between the annual return on IBM and Disney. Interpret this correlation.

b. If you put 80% of your money in IBM and 20% in Disney, find the mean and standard deviation of your annual return.

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Managerial Statistics

ISBN: 9780534389314

1st Edition

Authors: S. Christian Albright, Wayne L. Winston, Christopher Zappe

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Question Posted: Jul 28, 2023 07:49 AM

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There are three possible states of the economy during the next year (states 1, 2, and 3).

Question:

TABLE 5.38 Returns on IBM and Disney Stocks Probability IBM Return 0.40 0.30 0.30 State 123 1 2 3 0.20 0.14 0.12 Disney Return 0.24 0.16 0.06 AK

Step by Step Answer:

To find the correlation between the annual return on IBM and Disney we first need to calculate the covariance between the two stocks The covariance is ...View the full answer

Managerial Statistics

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