Security X has expected return of 14% and standard deviation of 22%.Security Y has expected return of 16% and standard deviation of 28%.If the two securities have a correlation coefficient of 0.8, what is their covariance?

Question

Quizplus · Accepted Answer

The formula for calculating covariance is:
Cov(X,Y) = Corr(X,Y) x StdDev(X) x StdDev(Y)
Plugging in the values, we get:
Cov(X,Y) = 0.8 x 0.22 x 0.28
Cov(X,Y) = 0.049
Therefore, the answer is B - 0.049.

Security X Has Expected Return of 14% and Standard Deviation