Calculate the expected return and the variance

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Question: You believe that there is a 15% chance that stock A will decline by 10% and an 85% chance that it will increase by 15%. Correspondingly, there is a 30% chance that stock B will decline by 18% and a 70% chance that it will increase by 22%. The correlation coefficient between the two stocks is 0.55. Calculate the expected return, the variance, and the standard deviation for each stock. Then calculate the covariance between their returns.

Reference no: EM131477151

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