Question

In: Statistics and Probability

You are trying to develop a strategy for investing in two different stocks. The anticipated annual...

You are trying to develop a strategy for investing in two different stocks. The anticipated annual return for a $1,000 investment in each stock under four different economic conditions has the following probability distribution:

Probability : 0.1 , 0.3, 0.3 , 0.3 .

Economic Condition: Recession, slow growth, moderate growth, fast growth.

  1. Return} -Stock X: -100 , 0 , 80 , 150 .

  2. - Stock Y: 50 , 150 , -20 , -100 .

a) Covariance of stock X and Y

Solutions

Expert Solution

Covariance of stock X and Y is  - 8066 .66


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