Security X Has Expected Return of 12% and Standard Deviation

question 31

Multiple Choice

Security X has expected return of 12% and standard deviation of 18%. Security Y has expected return of 15% and standard deviation of 26%. 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) 0.033
• E) 0.054

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Definitions:

Demand

The quantity of a good or service that consumers are willing and able to purchase at a given price.

Supply

The total amount of a specific good or service that is available to consumers at a given price point and time.

Complements

Goods or services that are used together, where the use or value of one increases the use or value of the other.

Controllable Factor

An element within a business or project that can be managed or influenced directly.