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Given the returns for two stocks with the following information, calculate the covariance of the returns for the two stocks. Probability Return Stock 1 Return

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Given the returns for two stocks with the following information, calculate the covariance of the returns for the two stocks. Probability Return Stock 1 Return Stock 2 0.4 0.5 0.1 10% 12% 1590 1190 10% 14% E(R) 1 E(R) 2 Cov(R1,R2) Covariance Step 1: E(R)Stockl-PI)( RSI l) (P2)( RSI 2)-(P3)( RS13) E(R) Stock 2 (P)(RS 21) + (P2 (RS 22) + (P3)(RS 23) Step 2

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