A. Briefly explain what is meant by a conditional probability. [3 Marks] B. The following data was collected in relation to interest rates and investment returns. As an investor, you are keep to determine the degree. If any, of relationship between the two. 4 Interest Rate Fluctuations (%) Returns on investments (%) 16 22 13 26 20 14 40 5 Required: i. Calculate the Covariance of the two variables. [5 marks] ii. Calculate the Correlation Coefficient of the two variables. [7 marks] C. An investment offers the following expectations: 35% chance of receiving K15,000 35% chance of receiving K19,000 30% chance of receiving K30,000 This investment provides the option of accepting a guaranteed K25,000 cash inflow with a risk-adjusted rate of 15% and a risk free rate of 5%. Required: i. Compute the certainty equivalent cash flow. [4 marks] ii. Which option should a risk averse investor opt for and why? [2 marks] D. Assume that the following list represents the continuous distribution of returns for a particular investment. 5.2%, 12.2%, 15%, 20%, 6%, 11.3%, -8%, -20% Required: Calculate the standard deviation for the above returns assuming a continuous distribution.