Question

Suppose E[X1] = 5 and Var[X1] = 6. Suppose E[X2] = 8 and Var[X2] = 7....

Suppose E[X1] = 5 and Var[X1] = 6. Suppose E[X2] = 8 and Var[X2] = 7. Suppose also that the covariance between X1 and X2 is 2.5.

a) calculate the expected value and variance of X2 − X1.

b) calculate the correlation of U = X2 − X1 and V = X2 − 2X1.

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