The standard deviation of return on investment A is 10 whil

. The standard deviation of return on investment A is .10 while the standard deviation of return on investment B is .04. If the correlation coefficient between the returns on A and B is -.50, the covariance of returns on A and B is _________.
A. -.0447
B. -.0020
C. .0020
D. .0447

Solution

Correct option in > B. -.0020

Covariance of A and B = Correlation of A and B x Standard deviation of A x Standard deviation of B

Covariance of A and B = -0.5 x 0.1 x 0.04

Covariance of A and B = -0.002 or -.0020