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The possible outcomes for the returns on Stock X and the returns on the market portfolio...

The possible outcomes for the returns on Stock X and the returns on the market portfolio have been estimated as follows:                                                              
                        Scenario          Stock X             Market portfolio                                 
                        1                      9%                   10%                             
                        2                      21%                 13%                             
                        3                      13%                 11%                   

Each scenario is considered to be equally likely to occur. Calculate the covariance of the returns of Stock X and the market portfolio.

A) 0.03%

B) 0.57%

C) 1.62%                                                         

D) 0.06%

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Expert Solution

NO EXCEL FUNCTION IS USED. JUST USED TABLE FORMAT. EVEN AUTHORS OF THE MANY BOOKS HAVE RECOMMENDED THIS METHOD AS IT IS EASIER TO PREPARE AND REMEMBER.

jeff jeffy answered 6 months ago
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