Security M Has Expected Return of 17% and Standard Deviation

question 60

Multiple Choice

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

• A)0.038
• B)0.049
• C)0.047
• D)0.045
• E)0.054

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Definitions:

Par Value

The face value of a bond or stock as stated by the issuing company, which does not necessarily match the market value.

Annual Coupon

The yearly interest payment issued to bondholders, typically expressed as a percentage of the bond’s face value.

Market Interest Rate

The prevailing rate of interest determined by supply and demand in the market, influencing how much borrowers pay for loans and investors earn on deposits.

Annual Coupon

The yearly interest payment paid to a bond's holders, typically expressed as a percentage of the bond's face value.