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Question(s) / Instruction(s):

The cash flows from two projects under different states of the economy are as follows:

State of the Economy             Profitability     Microsoft        Boeing

Poor                                         10%                 -5%                  -40%

Average                                   40%                 10%                 -10%

Good                                       50%                 20%                 50%

a.         Find the correlation coefficient between the two projects.

b.         Find the σ of Microsoft and of Boeing.

c.         Find the coefficient of correlation between the two stocks.

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