You are working with the marketing team for a FMCG firm that produces shaving cream. The team believes that sales of some of the products are closely related to sales of other products. They want you to explore this in a little more depth for two products, SKU 489 and SKU 705. Unfortunately, all of the base sales data for these products has been destroyed. All that you have is the weekly summary data:

Data Mean Standard Deviation

SKU 489853111 853 111

SKU 7051033230 1033 230

Part 1

The marketing team believes the correlation of these items is 0.87.

What would the covariance need to be for the marketing team to be correct?

Part 2

Now the marketing team wants to understand the potential weekly sales for these two products. Let the sales price for the two SKUs be 12.50, 7.75, respectively.

A) What is the expected weekly revenue?

B) Assume that marketing is correct and the correlation = 0.87.

What is the standard deviation of the weekly revenue?