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ochremole532Lv1
28 Sep 2019
Given the returns and probabilities for the three possible states listed here, calculate the covariance between the returns of Stock A and Stock B. For convenience, assume that the expected returns of Stock A and Stock B are 0.09 and 0.16, respectively. (Round your answer to 4 decimal places. For example .1244)
Probability
Return(A)
Return(B)
Good
0.35
0.30
0.50
OK
0.50
0.10
0.10
Poor
0.15
-0.25
-0.30
Given the returns and probabilities for the three possible states listed here, calculate the covariance between the returns of Stock A and Stock B. For convenience, assume that the expected returns of Stock A and Stock B are 0.09 and 0.16, respectively. (Round your answer to 4 decimal places. For example .1244)
| Probability | Return(A) | Return(B) | |
| Good | 0.35 | 0.30 | 0.50 |
| OK | 0.50 | 0.10 | 0.10 |
| Poor | 0.15 | -0.25 | -0.30 |
Bunny GreenfelderLv2
28 Sep 2019
Related questions
Consider the following information:
| Rate of Return if State Occurs | ||||||||||||
| State of | Probability of | |||||||||||
| Economy | State of Economy | Stock A | Stock B | Stock C | ||||||||
| Boom | 0.15 | 0.35 | 0.45 | 0.25 | ||||||||
| Good | 0.60 | 0.19 | 0.16 | 0.10 | ||||||||
| Poor | 0.20 | â | 0.03 | â | 0.06 | â | 0.05 | |||||
| Bust | 0.05 | â | 0.13 | â | 0.31 | â | 0.08 | |||||
| a. | Your portfolio is invested 28 percent each in A and C, and 44 percent in B. What is the expected return of the portfolio? (Round your answer to 2 decimal places. (e.g., 32.16)) |
| Expected return | % |
| b-1 | What is the variance of this portfolio? (Do not round intermediate calculations and round your answer to 5 decimal places. (e.g., 32.16161)) |
| Variance |
| b-2 | What is the standard deviation? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) |
| Standard deviation | % |
