About the covariance between stock

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Reference no: EM131340758

Use the following information of rates of return for Stock A and Stock B to answer;

Probability of State

State of Economy of Economy Return on A Return on B

Recession .50 -0.10 0.20

Boom .50 0.30 - 0.10

What can be said about the covariance between Stock A and Stock B? (This question has only 3 possible answer choices – no choice D and no choice E)

A. The covariance will be equal to zero or very close to zero

B. The covariance will be greater than zero

C. The covariance will be less than zero

Reference no: EM131340758

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