The correct answer is option D. The covariance between securities a and b is 195.
To calculate the covariance between securities a and b, we can use the formula:
covariance = correlation coefficient * standard deviation of security a * standard deviation of security b
Plugging in the given values, we get:
covariance = 0.65 * 12 * 25 = 195
Therefore, the answer is (d) 195.
The covariance between two securities measures the extent to which the two securities tend to move together. A positive covariance indicates that the securities tend to move in the same direction, while a negative covariance indicates that the securities tend to move in opposite directions.
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