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

Answer 1

Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.

Cell reference -

Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.