Economy

Consider the table below, which describes the rate of economic growth (X) and the rate of return on the S&P (Y). Assume that X & Y are discrete random variables.

Economic Growth, %

X

S&P Returns, %

Y

4.8

3.8

3.5

4.6

4.2

7.2

3.6

5.1

a) Compute the covariance between the returns of the S&P and economic growth .

b) Compute the correlation coefficient and interpret your findings .