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Consider the following table: Scenario Probability Stock Fund Rate of Return Bond Fund Rate of Return Severe recession 0.05 30% 8% Mild recession 0.20 15.0%
Consider the following table:
Scenario | Probability | Stock Fund Rate of Return | Bond Fund Rate of Return |
---|---|---|---|
Severe recession | 0.05 | 30% | 8% |
Mild recession | 0.20 | 15.0% | 8% |
Normal growth | 0.30 | 9% | 4% |
Boom | 0.45 | 38% | 6% |
Required:
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.)
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.)
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