Security M has expected return of 17% and standard deviation of 28%. Security S has expected return of 13% and standard deviation of 15%. If the two securities have a correlation coefficient of 0.78, what is their covariance?
A) 0.018
B) 0.029
C) 0.033
D) 0.045
E) 0.054

Question

Quizplus · Accepted Answer

Covariance = Correlation coefficient * Standard deviation of Security M * Standard deviation of Security S= 0.78 * 0.28 * 0.15= 0.033

Security M Has Expected Return of 17% and Standard Deviation