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Consider the following two weather derivatives: Instrument A pays $5 if it rains, and nothing if it does not rain; Instrument B pays $12 if
Consider the following two weather derivatives: Instrument A pays $5 if it rains, and nothing if it does not rain; Instrument B pays $12 if it rains, and $5 if it does not rain; If the probability of rain is 22%, what is the covariance of the payments of the two instruments? (Keep your answer to 4 decimal place, e.g. xxx.1234.)
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