There Is a 10 Percent Probability the Economy Will Boom,a

Multiple Choice

There is a 10 percent probability the economy will boom,a 65 percent probability it will be normal,and a 25 percent probability it will be recessionary.For these economic states,Stock A has deviations from its expected returns of .07,.02,and -.12,respectively.Stock B has deviations from its expected returns of .05,.01,and -.04,for the three economic states,respectively.What is the covariance of the two stocks?

A) .02049
B) .02143
C) .00168
D) .00116
E) .01054