Question

Based on the following information:

State of Economy	Probability of State of Economy	Return on Stock J	Return on Stock K
Bear	.20	-.010	.044
Normal	.55	.148	.072
Bull	.25	.228	.102

A.  Calculate the expected return for each of the stocks. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

Expected return:

Stock J

Stock K

B. Calculate the standard deviation for each of the stocks. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

Standard deviation:

Stock J %

Stock K %

C. What is the covariance between the returns of the two stocks? (Do not round intermediate calculations and round your answer to 6 decimal places, e.g., 32.161616.)

Covariance:

D. What is the correlation between the returns of the two stocks? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.)

Correlation:

Answer 1