I am currently working on some practice problems for finance and need help setting them up as well as calculating them: 10) between 1980 and 2000, the standard deviation of the returns for NIKKEI and DJIA indexed were 0.08 and 0.10 respectively, and the covariance of these index returns was 0.0007. what was the correlation coefficient between the two market indicators? 12) consider two securities, a and b. securities a and b have a correlation coefficient of 0.65. security a has a standard deviation of 12% and security b has standard deviation of 25% calculate the covariance between the two securities a stock has a beta of the stock equalling to be 1.25. the risk free rate is 5% and the market risk premium is 6%. the estimated return for the stock is 14%. according to the CAPM you should a) sell because it is overvalued b) sell because it is undervalued c) buy because it is overvalued d) buy because it is undervalued e) short because it is undervalued

Question

I am currently working on some practice problems for finance and need help setting them up as well as calculating them:

10) between 1980 and 2000, the standard deviation of the returns for NIKKEI and DJIA indexed were 0.08 and 0.10 respectively, and the covariance of these index returns was 0.0007. what was the correlation coefficient between the two market indicators?

12) consider two securities, a and b. securities a and b have a correlation coefficient of 0.65. security a has a standard deviation of 12% and security b has standard deviation of 25% calculate the covariance between the two securities

a stock has a beta of the stock equalling to be 1.25. the risk free rate is 5% and the market risk premium is 6%. the estimated return for the stock is 14%. according to the CAPM you should

a) sell because it is overvalued

b) sell because it is undervalued

c) buy because it is overvalued

d) buy because it is undervalued

e) short because it is undervalued

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