Question
Consider the following table: Scenario Probability Stock Fund Rate of Return Bond Fund Rate of Return Severe recession 0.15 34% 10% Mild recession 0.20 18.5%
Consider the following table:
| Scenario | Probability | Stock Fund Rate of Return | Bond Fund Rate of Return |
|---|---|---|---|
| Severe recession | 0.15 | 34% | 10% |
| Mild recession | 0.20 | 18.5% | 6% |
| Normal growth | 0.35 | 14% | 7% |
| Boom | 0.30 | 24% | 3% |
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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30 Days To Taming Your Finances What To Do To Better Manage Your Money
Authors: Deborah Smith Pegues
1st Edition
0736918361, 978-0736918367
