Question: Problem 3: Correlation, covariance, and beta Consider asset A traded in market M. Suppose AM = 0.2, m = 0.4, and oA = 0.2. Can

Problem 3: Correlation, covariance, and beta

Consider asset A traded in market M. Suppose AM = 0.2, m = 0.4, and oA = 0.2. Can you find the correlation coefficient between the return on A and the market return? If yes, show your work. If no, explain why not. (Hint: write down the relevant formulas, stare at them for a moment, then deduce how to compute pAM = corr(rA.M)

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