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Suppose that in Problem 20.17 the correlation between the S&P 500 Index (measured in dollars) and… 1 answer below » Suppose that in Problem 20.17 the correlation between the S&P 500 Index (measured in dollars) and the FT-SE 100 Index (measured in sterling) is 0.7, the correlation between the S&P 500 index (measured in dollars) and the dollar-sterling exchange rate is 0.3, and the daily volatility of the S&P 500 Index is 1.6%. What is the correlation between the S&P 500 Index (measured in dollars) and the FT-SE 100 Index when it is translated to dollars? (Hint: For three variables , , and , the covariance between and equals the covariance between and plus the covariance between and .) Feb 03 2016 08:34 PM
