Security X Has Expected Return of 9% and Standard Deviation

question 43

Multiple Choice

Security X has expected return of 9% and standard deviation of 18%. Security Y has expected return of 12% and standard deviation of 21%. If the two securities have a correlation coefficient of 0.4, what is their
Covariance?

• A) 0.0388
• B) 0.0706
• C) 0.0184
• D) -0.0133
• E) -0.0151

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Definitions:

Break Even

The point at which total costs and total revenue are equal, resulting in no net loss or gain for a business.

Meals

The portioned eating occasions in a day typically including breakfast, lunch, and dinner, and sometimes snacks, consisting of prepared food.

Cost Function

A mathematical relationship that describes how production costs change with changes in the volume of production.

Snow Removal

The process of removing snow after a snowfall to make travel easier and safer.