Security X Has Expected Return of 7% and Standard Deviation

question 56

Multiple Choice

Security X has expected return of 7% and standard deviation of 12%.Security Y has expected return of 11% and standard deviation of 20%.If the two securities have a correlation coefficient of -0.45,what is their covariance?

• A)0.0388
• B)-0.0108
• C)0.0184
• D)-0.0133
• E)-0.1512

---

Definitions:

Beta

A measure of a stock's volatility in relation to the overall market, indicating the stock's susceptibility to market movements.

Alpha

A measure of an investment's performance on a risk-adjusted basis, indicating how much better or worse it did compared to a benchmark index.

Expected Rate of Return

The weighted average of possible returns for an investment, acknowledging different scenarios and their probabilities.

Boeing

An American multinational corporation that designs, manufactures, and sells airplanes, rotorcraft, rockets, satellites, telecommunications equipment, and missiles worldwide.