Question: Calculate the correlation coefficient ( AB ) for the following situation: State of the economy : High growth Moderate Recession Probability of occurrence: 25% 20%

Calculate the correlation coefficient (AB) for the following situation:

State of the economy : High growth Moderate Recession

Probability of occurrence: 25% 20% 55%

Expected return on stock A in this state 40% 19% -7%

Expected return on stock B in this state 57% 27% -17%

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