Question: Given the returns and probabilities for the three possible states listed here, calculate the covariance between the returns of Stock A and Stock B. For
Given the returns and probabilities for the three possible states listed here, 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 0.10and0.15, respectively. (Round your answer to 4 decimal places. For example .1244)
Probability | Return(A) | Return(B) | |
Good | 0.35 | 0.30 | 0.50 |
OK | 0.50 | 0.10 | 0.10 |
Poor | 0.15 | -0.25 | -0.30 |
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
