Reference no: EM132623473

Use the information in the chart to answer the questions that follow

Individual                  State 1 Return (p=0. 3)               State 2 Return (p=0. 5)                  State 3 Return (p=0.2)

A                                    5%                                            11%                                                9%

B                                    6%                                             8%                                                 -3%

Given the above information on two investments A and B, calculate the following statistics

Problem 1: Assume the correlation coefficient between A and B is 0.4. Calculate the covariance between A and B. Answer in decimal form and use 4 decimal places.

Problem 2: Calculate the expected return on a portfolio consisting of 70% A and 30% B.

Problem 3: Calculate the standard deviation of a portfolio consisting of 70% A and 30% B. Answer in decimal form and use 3 decimal places.