Question: TABLE 5-5 SECURITY STATISTICS Security Covariances A B C D A B D A E(R) o? 14% 16% 0.766 0.735 1.050 1.200 12% 13% 0.563

TABLE 5-5 SECURITY STATISTICS Security Covariances A B C D A

B D A E(R) o? 14% 16% 0.766 0.735 1.050 1.200 12%

TABLE 5-5 SECURITY STATISTICS Security Covariances A B C D A B D A E(R) o? 14% 16% 0.766 0.735 1.050 1.200 12% 13% 0.563 0.353 0.900 0.950 0.766 0.315 0.236 0.249 0.315 0.735 0.270 0.285 0.236 0.270 0.563 0.214 0.249 0.285 0.214 0.353 B D B 80 perce 6. Refer to Table 5-5, and assume that securities C and D are well-diversified portfolios. Suppose the market variance changes to 0.32. What new covari- ance between securities C and D does this change suggest? 7. A security has a variance of return of 25 percent. What is the standard deviation of its returns? 8. Using the data in Table 5-5, calculate the correlation between Securities B and C. 9. Given B. = 1.10, B2 = 1.25, and 012 1.55, find the variance of the market

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