Stock a is expected to return 14 percent in a normal


Stock A is expected to return 14 percent in a normal economy and lose 21 percent in a recession. Stock B is expected to return 11 percent in a normal economy and 5 percent in a recession. The probability of the economy being normal is 75 percent with a 25 percent probability of a recession. What is the covariance of these two securities?

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Financial Management: Stock a is expected to return 14 percent in a normal
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