State of Nature.........Probability........State Dependent Return A.........Stat

Question

State of Nature.........Probability........State Dependent Return A.........State Dependent Return B Recession....................70%..........................-.08................................................-.04 Expansion....................30%..........................0.28...............................................0.16 What comes closest to the covariance between Stock A and Stock B?

a. .0028 b. .0000 c. .0151 d. -.0028 e. .1170 ---------------------------------------------------------------------------------- State of Nature.........Probability........State Dependent Return A.........State Dependent Return B Recession....................70%..........................-.08................................................-.04 Expansion....................30%..........................0.28...............................................0.16 What comes closest to the variance of Stock A and the standard deviation of Stock B? a. Variance of Stock A = .0115, Standard deviation of Stock B = .0917 b. Variance of Stock A = .0272, Standard deviation of Stock B = .1033 c. Variance of Stock A = .0000, Standard deviation of Stock B = .0000 d. Variance of Stock A = .0115, Standard deviation of Stock B = .1033 e. Variance of Stock A = .0272, Standard deviation of Stock B = .0917

Explanation / Answer

-.0028

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