Security X Has Expected Return of 14% and Standard Deviation

question 33

Multiple Choice

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?

• A) 0.038
• B) 0.049
• C) 0.018
• D) 0.013
• E) 0.054

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Definitions:

Learning Ability

The capacity to acquire knowledge, understand through experience, and adapt to new situations or information.

Intelligence Quotient

A measure of a person's cognitive ability in relation to their age group, usually represented as a numerical score.

Intellectual Quandary

A state of confusion or uncertainty, often involving a complex or perplexing matter that requires deep intellectual effort to resolve.

Primary Mental Abilities

Basic intellectual skills that include numerical and verbal abilities, spatial relations, memory, and others, as identified by psychologist L.L. Thurstone.