Security X has expected return of 12% and standard deviation of 18%.Security Y has expected return of 15% and standard deviation of 26%.If the two securities have a correlation coefficient of 0.7, what is their covariance?

Question

Quizplus · Accepted Answer

The formula for covariance is:
Cov(X,Y) = Corr(X,Y) x StdDev(X) x StdDev(Y)
Plugging in the values:
Cov(X,Y) = 0.7 x 0.18 x 0.26 = 0.033
Therefore, the answer is D.

Security X Has Expected Return of 12% and Standard Deviation