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State of Economy Probability of State of Economy Return on Stock J Return on Stock K Bear .30 .063 .014 Normal .55 .109 .081 Bull

State of Economy Probability of State of Economy Return on Stock J Return on Stock K

Bear .30 .063 .014

Normal .55 .109 .081

Bull .15 .293 .104

a. Calculate the expected return for each of the stocks.

b. Calculate the standard deviation for each of the stocks.

c. What is the covariance between the returns of the two stocks?

d. What is the correlation between the returns of the two stocks?

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