Financial Economics class.

Reference - Investments by Bodie, Kane and Marcus, 10th edition, but the use of the 9th or 11th edition.

Exercise 2. Suppose you are drawing randomly from three cards: a jack, a queen, and a king. If you draw a jack it pays off 0 dollars, if you draw a queen it pays off 1 dollars, and if you draw a king it pays off 2 dollars. What are the expected value, variance, and standard deviation of your payoff from this game? Now suppose you draw twice, without replacement [i.e., for the second draw you are only drawing from the remaining two cards). The payoffs are the same as above for both draws. What are the expected value, variance, and standard deviation of your total payoff from the two draws? Exercise 3. What are the covariance and correlation of the payoff of your rst draw and the payolf of your second draw