problem: Given the returns and probabilities for the 3 possible states listed here, find out the covariance between the returns if Stock A & Stock B. for convenience, suppose that the expected returns of stock A & Stock B are 11.75% and 18% , respectively.

Probability

Return(A)

Return(B)

Good

0.35

0.30

0.50

OK

0.50

0.10

0.10

Poor

0.15

0.25

0.30
