You are given the following information: State of Economy Return on Stock A Return on Stock B
Question:
You are given the following information: |
State of Economy | Return on Stock A | Return on Stock B |
Bear | .103 | −.046 |
Normal | .114 | .149 |
Bull | .074 | .234 |
Assume each state of the economy is equally likely to happen. |
Calculate the expected return of each of the following stocks. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) |
Expected return | |
Stock A | % |
Stock B | % |
Calculate the standard deviation of each of the following stocks. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) |
Standard deviation | |
Stock A | % |
Stock B | % |
What is the covariance between the returns of the two stocks? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 6 decimal places, e.g., 32.161616.) |
Covariance |
What is the correlation between the returns of the two stocks? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.) |
Correlation |
Corporate Finance Core Principles And Applications
ISBN: 9781260571127
6th Edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan