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Determine the expected covariance of returns

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Reference no: EM133068459

The Sunrise and Sunset companies have the following probability distribution of returns: Economic Growth Probability Sunrise Return (%) Sunrise Return (%)

high growth 0.1 32 30

normal growth 0.2 20 17

slow growth 0.4 14 6

stagnation 0.2 -5 -12

decline 0.1 -10 -16

You are required :

(a) to determine the expected covariance of returns

(b) The correlation returns between the Sunrise and Sunset companies

Reference no: EM133068459

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