Security M has expected return of 17% and standard deviation of 32%.Security S has expected return of 13% and standard deviation of 19%.If the two securities have a correlation coefficient of 0.78, what is their covariance?

Question

Quizplus · Accepted Answer

The formula for covariance is:
cov(M,S) = correlation coefficient * standard deviation of M * standard deviation of S

Plugging in the numbers:
cov(M,S) = 0.78 * 0.32 * 0.19 = 0.047

Therefore, the answer is C) 0.047.

Security M Has Expected Return of 17% and Standard Deviation