Question
You invest $20,000 in a portfolio comprising Stock Mango and Stock Apple, of which $15,000 is invested in Stock Mango. You are advised that the
You invest $20,000 in a portfolio comprising Stock Mango and Stock Apple, of which $15,000 is invested in Stock Mango. You are advised that the correlation between Stock Mange and Stock Apple is 0.95. The following portfolio details, including the expected return and standard deviation of each stock, are also provided: Rate of Return if State Occurs: Probability of State of Economy Stock Mango Stock Apple Recession 0.20 5% 20% Normal 0.50 20% 30% Boom ??? 60% 40% Expected Return 29% 31% Standard Deviation 21% 7% What is the covariance between Stock Mango and Stock Apple?
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