Security X has expected return of 12% and standard deviation of 20%.Security Y has expected return of 15% and standard deviation of 27%.If the two securities have a correlation coefficient of 0.7,what is their covariance?
A)0.038
B)0.070
C)0.018
D)0.013
E)0.054

Question

Quizplus · Accepted Answer

Covariance = Correlation coefficient * Standard deviation of Security X * Standard deviation of Security Y= 0.7 * 0.20 * 0.27= 0.038

Security X Has Expected Return of 12% and Standard Deviation