5.19 please make sure of risk

d. Would you invest in the corporate bond fund or the com- mon stock fund? Explain. 5.19 Suppose that in Problem 5.18 you wanted to create a portfolio that consists of the corporate bond fund and the common stock fund. Compute the portfolio expected return and portfolio risk for each of the following situations: a. $300 in the corporate bond fund and $700 in the common stock fund. b. $500 in each fund. c. $700 in the corporate bond fund and $300 in the common stock fund. d. On the basis of the results of (a) through (c), which port- folio would you recommend? Explain. ION llow use mathematical models to solve business problems. athematical expression that represents a variable of interest. n is available, you can compute the exact probability of occur- of the variable. is one of the most useful mathematical models. You use the Hiscrete random variable is the number of events of interest in a inomial distribution has four basic properties: xed number of observations, n. 189 5.3: Binomial Distribution the annual return (per $1.000) of each of these investments under different economic conditions is available, along with the probability that each of these economic conditions will nich port- occur ng in two $1,000 onomic Corporate Bond Fund Common Stock Fund Economic Probability Condition 0.10 Recession 0.15 Stagnation 0.35 Slow growth 0.30 Moderate growth 0.10 High growth 5 -30 50 90 100 110 -150 -20 120 160 250 eck Y 100 50 30 00 Compute the a. expected return for the corporate bond fund and for the common stock fund. b. standard deviation for the corporate bond fund and for the common stock fund. c. covariance of the corporate bond fund and the common stock fund. d. Would you invest in the corporate bond fund or the com- mon stock fund? Explain. ea ne le 5.19 Suppose that in Problem 5.18 you wanted to create a portfolio that consists of the corporate bond fund and the common stock fund. Compute the portfolio expected return and portfolio risk for each of the following situations: a. $300 in the corporate bond fund and $700 in the common stock fund. b. $500 in each fund. c. $700 in the corporate bond fund and $300 in the common stock fund. d. On the basis of the results of (a) through (C), which port- folio would you recommend? Explain. IOM