Problem 2 (36 marks) You have done your research for the following investments and your friend has provided their expectations for the markets for next year. Probability of State of State of Stock Stock Stock Stock Economy Economy A C D T-bills Boom .30 20% 25% 20% -10% Normal .40 15% 12% 16% 15% Recession .30 -16% -15% -8% 25% 3% * Remember to show all of your work B 3% 3% Stock Market 20% 15% -8% m. Calculate the covariance and correlation of the returns for stock A and stock B. (2 marks) n. Calculate the covariance and correlation of the returns for stock A and stock C. (2 marks) o. Calculate the covariance and correlation of the returns for stock A and stock D. (2 marks) p. Calculate the covariance and correlation of the returns for stock B and stock C. (2 marks) q. Calculate the covariance and correlation of the returns for stock B and stock D. (2 marks) r. Calculate the covariance and correlation of the returns for stock C and stock D. (2 marks)