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The Sunrise and Sunset companies have the following probability distribution of returns: Returns (%) Economic conditions Probability Sunrise Sunset High growth 0.1 32 30 Normal growth

The Sunrise and Sunset companies have the following probability distribution of returns:

Returns (%)

Economic conditions Probability Sunrise Sunset

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 and (b) the correlation of returns between the Sunrise and Sunset companies.

Jun 23 2020 View more View Less

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