Calculate the covariance between stock A and stock B 1. Worst Normal Economy Bad Good Best Prob 25% 5% 5% 40% 25% Stock A 8% 10% 12% 14% 16% Stock B -4% 4% 12% 20% 28% What is the general equation for variance of a portfolio of 5 securities, stock a, b, c, d, and e? 2. Var(portfolioz) = waoa +w^a^ +2waWbOaObPab waawzo + w?a2 + 2waWpcovab +2wawccovac+ 2wpwccovbc Var(portfolio3) : Var (portfolios) = 3. What is expected return and standard deviation for a portfolio in which 75% is invested in auto stock and 25% is invested in gold stock? Rate of Return Auto Stock Gold Stock Probability Scenario -8.0% 20.0% Recession 1/3 5.0% 3.0% Normal 1/3 Boom 1/3 18.0% -20.0% Expected Return 5.0% 1.0% Standard Deviation 10.6% 16.4%