Question: Using the table below to answer the questions; Market condition Boom Normal Recession Expected return Standard deviation Probability 0.1 0.8 0.1 Return on investments

Using the table below to answer the questions; Market condition Boom Normal Recession Expected return Standard deviation Probability 0.1 0.8 0.1 Return on investments % A plc 30 20 10 20 4.47 B plc 10 20 10 20 4.47 C plc 10 20 30 20 4.47 D plc 10 22.5 10 20 4.47 For the each of the portfolios, A+B, A+C and A+D Calculate, i) Covariance ii) Correlation coefficient c) Using the answer in (ii) above to explain the relationship between the returns of each portfolio.

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