Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

7. You are given the following information: State of Economy Return on Stock A Return on Stock B Bear .112 .055 Normal .105 .158 Bull

7.

You are given the following information:

State of Economy Return on Stock A Return on Stock B
Bear .112 .055
Normal .105 .158
Bull .083 .243

Assume each state of the economy is equally likely to happen.

Calculate the expected return of each stock. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places (e.g., 32.16).)

Expected return
Stock A %
Stock B %

Calculate the standard deviation of each stock. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places (e.g., 32.16).)

Standard deviation
Stock A %
Stock B %

What is the covariance between the returns of the two stocks? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to 6 decimal places (e.g., 32.161616).)

Covariance

What is the correlation between the returns of the two stocks? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to 4 decimal places (e.g., 32.1616).)

Correlation

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Professionals Handbook Of Financial Risk Management

Authors: Lev Borodovsky, Marc Lore

1st Edition

0750641118, 978-0750641111

More Books

Students also viewed these Finance questions