Question
8. Consider the following table: Stock Fund Bond Fund Scenario Probability Rate of Return Rate of Return Severe recession 0.20 38% 12% Mild recession 0.20
8. Consider the following table:
|
| Stock Fund | Bond Fund |
Scenario | Probability | Rate of Return | Rate of Return |
Severe recession | 0.20 | 38% | 12% |
Mild recession | 0.20 | 26.0% | 7% |
Normal growth | 0.35 | 8% | 3% |
Boom | 0.25 | 46% | 7% |
|
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 | 1.5 | % |
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 |
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