Dear David, kindly see the below questions: consider two stocks, A and B. Assume their annual returns are jointly normaly distributed, the marginal distribution of each stock has mean 2% and standard deviation of 10%, an corrolation of 0.9. what is the expected return of stock A if the annual return of stock B is 3%. 1)2% 2)2.9% 3)4.7% 4)1.1% The answer is 2.9%.. however, shouldn't be 2.7%..(3%*.9)?? It's a very simple question; however, i can't get 2.9%. Best, s

Hi saray, please see explanation here @ http://www.bionicturtle.com/forum/viewthread/4447/ Hope that helps, hope studies are going well! Thanks, David

Many thanks for the prompt response.. and i thought it is an easy question!.. i was quite wrong. tx a lot.