Suppose Stock M has an expected return of 10%, a standard deviation of 15%, and a Beta of 0.6 while Stock N has an expected return of 20%, a standard deviation of 25% and a beta of 1.04, and the correlation between the two stocks is 0.50. What is the covariance between Stock M and Stock N?
A) 0.01052
B) 0.01875
C) 0.03425
D) 0.04775

Question

Quizplus · Accepted Answer

Covariance is calculated as the product of the correlation coefficient and the standard deviations of the two stocks: 0.50 * 0.15 * 0.25 = 0.01875.

Suppose Stock M Has an Expected Return of 10%, a Standard