Question: Economic State Probability Return Stock A Return Stock B Recession 0.10 2% -30% Normal 0.50 10% 18% Boom 0.40 15% 31% Calculate the expected return

Economic State Probability Return Stock A Return Stock B

Recession 0.10 2% -30%

Normal 0.50 10% 18%

Boom 0.40 15% 31%

  1. Calculate the expected return for stocks A and B.

  1. Calculate the variance and standard deviation of returns for stock A and B.

  1. Calculate the covariance of returns between the returns of stocks A and B.

  1. Calculate the coefficient of correlation between the returns to stocks A and B.

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