Question: The following is a probability distribution for returns on a security A and a proxy for the market, M. Parts a-i can earn up to

The following is a probability distribution for returns on a security A and a proxy for the market, M. Parts a-i can earn up to one point each except for part, g that earn up to two points.

StateProbabilityrArM

115%15%12%

235%8%6%

335%4%1%

415%-6%-2%

  1. Calculate the expected returns on security A and the market.
  2. Calculate the variances and the standard deviations of security A and the market.
  3. Calculate the covariance between A and M. Calculate the beta of security A (4 decimal places). What is the beta of the market?
  4. Calculate the correlation coefficient between security, A, and the market.

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