There Is a 5 Percent Probability the Economy Will Boom,an

Multiple Choice

There is a 5 percent probability the economy will boom,an 85 percent probability it will be normal,and a 10 percent probability it will be recessionary.For these economic states,Stock A has deviations from its expected returns of .06,.01,and -.08,respectively.Stock B has deviations from its expected returns of .06,.00,and -.05,for the three economic states,respectively.What is the covariance of the two stocks?

A) .00058
B) .00143
C) .00189
D) .00074
E) .00102