Question

Consider the following probability distribution for stocks A and B: State   Probability Return on Stock A...

Consider the following probability distribution for stocks A and B:

State  

Probability

Return on Stock A

Return on Stock B

1

0.10

10%

8%

2

0.20

13%

7%

3

0.20

12%

6%

4

0.30

14%

9%

5

0.20

15%

8%

The coefficient of correlation between A and B is

(Hint: compute variance and covariance first.)

Group of answer choices

0.47.

none of the above.

0.60.

0.58

1.20.

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Answer #1

hence co- rrelation coefficient between A & B = 0.43546

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