State of Economy Return on Stock A Return on Stock B Bear .073-094 Normal .134.142 Bull .062.321 Assume each state of the economy is equally likely to happen. a. Calculate the expected return of each stock. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. Calculate the standard deviation of each stock. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g 32.16.) c. What is the covariance between the returns of the two stocks? (A negative answer should be indicated by a minus sign, Do not round intermediate calculations and round your answer to 6 decimal places, e.g., .161616.) d. What is the correlation between the returns of the two stocks? (A negative answer should be indicated by a minus sign, Do not round intermediate calculations and round your answer to 4 decimal places, e.g., .1616.)

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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State of Economy Return on Stock A Return on Stock B
Bear .073-094
Normal .134.142
Bull .062.321
Assume each state of the economy is equally likely to happen.
a. Calculate the expected return of each stock. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
b. Calculate the standard deviation of each stock. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g
32.16.)
c. What is the covariance between the returns of the two stocks? (A negative answer should be indicated by a minus sign, Do not round intermediate calculations and
round your answer to 6 decimal places, e.g., .161616.)
d. What is the correlation between the returns of the two stocks? (A negative answer should be indicated by a minus sign, Do not round intermediate calculations and
round your answer to 4 decimal places, e.g., .1616.)
Transcribed Image Text:State of Economy Return on Stock A Return on Stock B Bear .073-094 Normal .134.142 Bull .062.321 Assume each state of the economy is equally likely to happen. a. Calculate the expected return of each stock. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. Calculate the standard deviation of each stock. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g 32.16.) c. What is the covariance between the returns of the two stocks? (A negative answer should be indicated by a minus sign, Do not round intermediate calculations and round your answer to 6 decimal places, e.g., .161616.) d. What is the correlation between the returns of the two stocks? (A negative answer should be indicated by a minus sign, Do not round intermediate calculations and round your answer to 4 decimal places, e.g., .1616.)
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