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Consider the following table: Stock Fund Bond Fund Scenario Probability Rate of Return Rate of Return Severe recession 0.05 41% 18% Mild recession 0.20 11.0%
Consider the following table:
Stock Fund | Bond Fund | ||
Scenario | Probability | Rate of Return | Rate of Return |
Severe recession | 0.05 | 41% | 18% |
Mild recession | 0.20 | 11.0% | 14% |
Normal growth | 0.30 | 8% | 5% |
Boom | 0.45 | 34% | 6% |
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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