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

1.0 Consider two risky assets with returns K and K2 as

1.0 Consider two risky assets with returns K and K2 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 COU(K1, K2) and the correlation P1,2 = C1,2 0102

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