Stock a Is Expected to Return 14 Percent in a Normal

Multiple Choice

Stock A is expected to return 14 percent in a normal economy and lose 21 percent in a recession.Stock B is expected to return 11 percent in a normal economy and 5 percent in a recession.The probability of the economy being normal is 75 percent and being recessionary is 25 percent.What is the covariance of these two securities?

A) .007006
B) .006563
C) .005180
D) .007309
E) .006274