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State of Probability ABC Company Expected Return DEF Company Expected Return Economy Very Good 0.30 25% 31% Good 0.40 15% 26% Average 0.25 5% 9% Poor 0.05 -7% -4% Expected Return 14.4% 21.75% Variance 0.010669 A) Calculate the variance of the returns of ABC Company. 6 Decimal Points B) Calculate the covariance of the expected returns of ABC Company and DEF Company. 6 Decimal Points C) Would a correlation of 0.95 between two company's stocks provide diversification benefits? Yes/No

State of Probability ABC Company Expected Return DEF Company Expected Return Economy Very Good 0.30 25% 31% Good 0.40 15% 26% Average 0.25 5% 9% Poor 0.05 -7% -4% Expected Return 14.4% 21.75% Variance 0.010669 A) Calculate the variance of the returns of ABC Company. 6 Decimal Points B) Calculate the covariance of the expected returns of ABC Company and DEF Company. 6 Decimal Points C) Would a correlation of 0.95 between two company's stocks provide diversification benefits? Yes/No

MATLAB: An Introduction with Applications
MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
Section: Chapter Questions
Problem 1P
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State of Probability ABC Company Expected Return DEF Company Expected Return Economy Very Good 0.30 25% 31% Good 0.40 15% 26% Average 0.25 5% 9% Poor 0.05 -7% -4% 21.75% Expected Return 14.4% Variance 0.010669 A) Calculate the variance of the returns of ABC Company. 6 Decimal Points B) Calculate the covariance of the expected returns of ABC Company and DEF Company. 6 Decimal Points C) Would a correlation of 0.95 between two company's stocks provide diversification benefits? Yes/No
Transcribed Image Text:State of Probability ABC Company Expected Return DEF Company Expected Return Economy Very Good 0.30 25% 31% Good 0.40 15% 26% Average 0.25 5% 9% Poor 0.05 -7% -4% 21.75% Expected Return 14.4% Variance 0.010669 A) Calculate the variance of the returns of ABC Company. 6 Decimal Points B) Calculate the covariance of the expected returns of ABC Company and DEF Company. 6 Decimal Points C) Would a correlation of 0.95 between two company's stocks provide diversification benefits? Yes/No
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