You believe that there is a 15 chance that stock a will


Question: You believe that there is a 15% chance that stock A will decline by 10% and an 85% chance that it will increase by 15%. Correspondingly, there is a 30% chance that stock B will decline by 18% and a 70% chance that it will increase by 22%. The correlation coefficient between the two stocks is 0.55. Calculate the expected return, the variance, and the standard deviation for each stock. Then calculate the covariance between their returns.

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Finance Basics: You believe that there is a 15 chance that stock a will
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