Security X Has Expected Return of 14% and Standard Deviation

question 8

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:

Laxatives

Substances that promote bowel movements and are used to treat or prevent constipation, often by softening stools or increasing their passage through the bowels.

Refeeding

The process of gradually reintroducing food after a period of malnutrition or starvation, aiming to prevent refeeding syndrome.

Contract

A legally binding agreement between two or more parties that outlines obligations and rights.