Question: 1.0 Consider two risky assets with returns K and K, as follows: (K1, K2) = (0.03, 0.04) with probability } (0.0,0.0) with probability (-0.03,-0.01) with

1.0 Consider two risky assets with returns K and K, as

1.0 Consider two risky assets with returns K and K, as follows: (K1, K2) = (0.03, 0.04) with probability } (0.0,0.0) with probability (-0.03,-0.01) with probability ; the mean and variance of Ki (we usually call these Mi and o) the mean and variance of K2 (we usually call these M2 and o) the covariance C1,2 = co Cov(K1, K2) and the correlation P1,2 = C1,2 0102

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