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Consider the following table: Stock Fund Bond Fund Scenario Probability Rate of Return Rate of Return Severe recession 0.10 37 % 9 % Mild recession
Consider the following table:
Stock Fund | Bond Fund | |||||||
Scenario | Probability | Rate of Return | Rate of Return | |||||
Severe recession | 0.10 | 37 | % | 9 | % | |||
Mild recession | 0.20 | 11 | % | 15 | % | |||
Normal growth | 0.35 | 14 | % | 8 | % | |||
Boom | 0.35 | 30 | % | 5 | % | |||
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.)
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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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