d$.$ If an investor chooses to invest in the common stock fund in $($c$),$ what should the investor think about the possibility of losing $$990$ of

every $$1,000$ invested if there is an extreme recession?

A$.$ The investor would need to assess on how to respond to the small possibility that almost all of the investment could be lost.

B$.$ The investor would need to assess on how to respond to the almost certainty that almost all of the investment could be lost.

C$.$ The investor would need to assess on how to respond to the small possibility that about $10\%$ of the investment could be lost.

D$.$ The investor would need to assess on how to respond to the almost certainty that about $10\%$ of the investment could be lost.

e$.$ The covariance of the corporate bond fund and common stock fund is

$($Round to two decimal places as needed.$)$

f$.$ What does the covariance indicate about the relationship between corporate bond fund and common stock fund?

A$.$ As the corporate bond fund increases in value, the common stock fund decreases in value.

B$.$ There is not enough information to determine the relationship.

C$.$ As the corporate bond fund decreases in value, the common stock fund increases in value.

D$.$ As the corporate bond fund increases in value, the common stock fund increases in value. f$.$ What does the covariance indicate about the relationship between corporate bond fund and common stock fund?

A$.$ As the corporate bond fund increases in value, the common stock fund decreases in value.

B$.$ There is not enough information to determine the relationship.

C$.$ As the corporate bond fund decreases in value, the common stock fund increases in value.

D$.$ As the corporate bond fund increases in value, the common stock fund increases in value.

g$.$ Suppose $62\%$ is invested in the corporate bond fund and the rest in the common stock fund, then the expected portfolio return is $ with a

portfolio risk of $

$($Round to the nearest cent as needed.$)$

h$.$ Suppose $28\%$ is invested in the corporate bond fund and the rest in the common stock fund, then the expected portfolio return is $ with a

portfolio risk of $

$($Round to the nearest cent as needed.$)$

$($Round to the nearest cent as needed.$)$

$($Round to the nearest cent as needed.$)$You plan to invest $$1,000$ in a corporate bond fund or in a common stock fund. The

table presents the annual return $($per $$1,000)$ of each of these investments under

different economic conditions and the probability that each of these economic

conditions will occur. Complete parts $($a$)$ through $($i below.

a$.$ Calculate the expected return for the corporate bond fund and for the common stock fund.

The expected return for the corporate bond fund is $

$($Round to the nearest cent as needed.$)$

The expected return for the common stock fund is $

$($Round to the nearest cent as needed.$)$

b$.$ Calculate the standard deviation for the corporate bond fund and for the common stock fund.

The standard deviation for the corporate bond fund is $

$($Round to the nearest cent as needed.$)$

The standard deviation for the common stock fund is $$.$

$($Round to the nearest cent as needed.$)$

c$.$ Would you invest in the corporate bond fund or the common stock fund? Explain.

Based on the expected value, the

fund should be chosen. Since the standard deviation for the common stock fund is

that for the corporate bond fund, the common stock fund

the corporate bond fund and an

investor

the risk when making a decision.