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Consider the information for assets X,Y, and Z below: State Probability Return on A Boom 0.2 0.3 Average 0.4 0.2 Bust 0.4 0.1 Return

  

Consider the information for assets X,Y, and Z below: State Probability Return on A Boom 0.2 0.3 Average 0.4 0.2 Bust 0.4 0.1 Return on B Return on C 0.05 0.1 0.15 0.25 0.2 0.3 1. Find the correlation coefficient between A and C 2. Consider Portfolio (Y) comprising 60% Asset A and 40% Asset B. Is portfolio Y diversified? Prove why or why not.

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