Question: Question 4 [15 marks] Show calculations no excel Compute the correlation coefficient between the two securities below: (12) Probability Security A Security B 20% 7%

Question 4 [15 marks] Show calculations no excel

Compute the correlation coefficient between the two securities below: (12)

Probability Security A Security B

20% 7% 9%

40% 5% 6%

30% 7% 4%

10% 15% 6%

If two securities are uncorrelated, one of the securities must be the risk-free security. How valid is this statement based on the calculation of the correlation coefficient in this instance? (3)

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