Question

In: Accounting

You have done your research for the following investments and your friend has provided their expectations...

You have done your research for the following investments and your friend has provided their expectations for the markets for next year.

State of

Economy

Probability of

State of Economy

Stock

A

Stock

B

Stock

C

Stock

D

T-bills

Stock

Market

Boom

.30

20%

25%

20%

-10%

3%

20%

Normal

.40

15%

12%

16%

15%

3%

15%

Recession

.30

-16%

-15%

-8%

25%

3%

-8%
  1. Calculate the covariance and correlation of the returns for stock A and stock B.
  2. Calculate the covariance and correlation of the returns for stock A and stock C.
  3. Calculate the covariance and correlation of the returns for stock A and stock D.
  4. Calculate the covariance and correlation of the returns for stock B and stock C.
  5. Calculate the covariance and correlation of the returns for stock B and stock D.
  6. Calculate the covariance and correlation of the returns for stock C and stock D.

Solutions

Expert Solution

ekkarill92 answered 1 year ago
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