1. The standard deviation of the market-index portfolio is 10%. Stock A has a beta of 2.70 and a residual standard deviation of 20%. a. Calculate the total variance for an increase of 0.10 in its beta. (Do not round intermediate calculations. Round your answer to the nearest whole number.)

Total variance %-Squared

b. Calculate the total variance for an increase of 1.33% in its residual standard deviation. (Do not round intermediate calculations. Round your answer to the nearest whole number.)

Total variance %-Squared

2.Consider the following table:

		Stock Fund	Bond Fund
Scenario	Probability	Rate of Return	Rate of Return
Severe recession	0.10	41%	14%
Mild recession	0.20	21%	20%
Normal growth	0.40	26%	13%
Boom	0.30	31%	10%

a. Calculate the values of mean return and variance for the stock fund. (Do not round intermediate calculations. Round "Mean return" value to 1 decimal place and "Variance" to 2 decimal places.)

Mean return		%
Variance		%-Squared

b. Calculate the value of the covariance between the stock and bond funds. (Negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)

Covariance %-Squared

3.Consider the following table:

		Stock Fund	Bond Fund
Scenario	Probability	Rate of Return	Rate of Return
Severe recession	0.10	46%	20%
Mild recession	0.20	24%	14%
Normal growth	0.30	8%	5%
Boom	0.40	44%	5%

a. Calculate the values of mean return and variance for the stock fund. (Do not round intermediate calculations. Round "Mean return" value to 1 decimal place and "Variance" to 4 decimal places.)

Mean return	%
Variance	%-Squared

b. Calculate the value of the covariance between the stock and bond funds. (Negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 4 decimal places.)

Covariance %-Squared