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# Assist the attached questions from the case study attached

Q7. What is the covariance between Outplace and the Market, and how is the covariance interpreted? What is the correlation between Outplace and the Market? How are the covariance and the correlation coefficient related?

Q8. The following equations can be used to find the expected return and the standard deviation of a portfolio of any two stocks X and Y: Use these equations to find (a) the expected return and (b) the standard deviation of portfolios that consist of 0%, 25%, 50%, 75%, and 100% of Outplace with the balance in the Market. Then graph your results with the portfolio’s return and SD on the vertical axis and the percent in Outplace on the horizontal axis. Then construct another graph with expected returns on the vertical axis and the portfolio’s SD on the horizontal axis. Then discuss your results.

Q14. Why is it important to consider the R2 and the standard error of beta as well as the value of beta itself? Then consider this statement: “The CAPM is more useful for investment management, where portfolios are being formed, than for corporate finance, where the CAPM is used to estimate the cost of a firm’s common stock.” Do you agree with the statement?