Given the returns and probabilities for the three possible states listed below, calculate the covariance between the
Question:
Given the returns and probabilities for the three possible states listed below, 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 11.75 percent and 18 percent, respectively.
Transcribed Image Text:
ProbabilityReturn(A) Return(B) Good OK Poor 0.35 0.50 0.15 0.30 0.10 0.25 0.50 0.10 0.30
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Related Book For
Fundamentals of corporate finance
ISBN: 978-0470876442
2nd Edition
Authors: Robert Parrino, David S. Kidwell, Thomas W. Bates
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