Answer-first summary for fast verification
Answer: 0.1865.
## Explanation The correlation coefficient formula is: \[ \text{Corr}(R_X, R_Y) = \frac{\text{Cov}(R_X, R_Y)}{\sigma_X \cdot \sigma_Y} \] Given: - Cov(R_X, R_Y) = 0.093 - Variance of R_X = 0.69 - Variance of R_Y = 0.36 First, calculate the standard deviations: \[ \sigma_X = \sqrt{0.69} = 0.830662 \] \[ \sigma_Y = \sqrt{0.36} = 0.6 \] Now calculate the correlation: \[ \text{Corr}(R_X, R_Y) = \frac{0.093}{0.830662 \times 0.6} = \frac{0.093}{0.4983972} = 0.1865 \] Therefore, the correlation is 0.1865, which corresponds to option B.
Author: Nikitesh Somanthe
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Assuming that the covariance of returns of Stock X and Stock Y is Cov(Rₓ, Rᵇ) = 0.093, the variance of Rₓ = 0.69, and the variance of Rᵇ = 0.36, the correlation of returns of Stock X and Stock Y is closest to:
A
0.155.
B
0.1865.
C
0.1119.
D
0.2133
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