Question

Consider two projects with returns in various states of nature that have the following relationship; knowing how one project performs gives no information about how the other project performs. In this case, what can we expect the covariance between the two projects to be

Answer 1

Equal to zero

Step-by-step explanation:

Covariance gives the joint relationship between two random variables.

If covariance is positive, it means that the variables move together. If it is negative, it means the variables don't move together.

If covariance is zero, it shows there's no relationship between the variables.

I hope my answer helps you