year R(A)

2004 9%

2005 7%

2006 10%

2007 3%

2008 -7%

1.A stock had annual returns as shown in the table above.Its arithmetic average return is

a.4.4%

b.5.5%

c.7.2%

d.10.0%

A B

R 5.20%. 9.40%

Var. 0.0036 0.0055

St. Dev. 6.00% 7.40%

2.Based on the information in the table above, what is the correlation coefficient between stocks A and B?

a.-0.0022

b.-0.0799

c.-0.4054

d.-0.9131

Scenario Probability E(R)

Boom 0.1 14.0%

Normal 0.3 8.0%

Recession 0.5 1.0%

Depression 0.1 4.0%

3.What is the Average Return of the Stock A based on the scenario analysis presented in the table above?

a.2.80%

b.3.90%

c.4.70%

d.6.80%

Year R(A) R(B)

2006 11.0% 14.0%

2007 5.0% 2.0%

2008 -4.0% -8.0%

Average 4.00% 2.67%

Variance 0.0057 0.01213

St.Dev. 7.55% 11.02%

4.What is the covariance between stocks A and B based on the historical information presented in the table above?

a.0.005467or 54.67

b.0.00832 or 83.2

c.0.0082or 82

d.0.0164or 164

year R(A)

2006 15.0%

2007 11.0%

2008 -5.0%

average 7.00%

5.What is the Standard Deviation of Stock A historical returns presented in the table above?

a.0%

b.8.64%

c.10.58%

d.14.97%