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EXPECTED VALUE OF A LINEAR COMBINATION OF RANDOM VARIABLES x AND y E(ax + by) = aE(x) + bE(y) (5.8) VARIANCE OF A LINEAR COMBINATION OF TWO RANDOM VARIABLES Var (ax + by) = a2Var (x) + b2Var(y)+ 2aboxy (5.9) where o, is the covariance of x and y.Question 8 10 pts Consider a financial market with two assets. Let X and Y be the stock returns of these assets. The joint probability distribution is given by Low return: Y=0 High return: Y=1 Low return: X=0 0.4 0.3 High return: X=1 0.2 0.1 Define X-Y as the difference in return between X and Y. Compute V(X-Y) (Enter your answer to two decimal places. For "0.72", you would write 0.72). Do not round. Important information to answer this question (also contained in slide 51 and textbook: equations (5.8) and (5.9)): The expected value of a linear combination of random variables is given by: E(aX+bY) = aE(X) + bE(Y), where a and b are constants. The variance of a linear combination of random variables is given by V(aX+by) = a2V(X) + b2v(Y) + 2abcoV(X,Y)