Scenario Probability of

Scenario Return on a 10-Year Zero Coupon Treasury Bond During the Next Year Worst Case 0.10 -14% Poor Case 0.20 -4% Most Likely 0.40 6% Good Case 0.20 16% Best Case 0.10 26% 1.00 You have also gathered historical returns for the past 10 years for Blandy, Gourmange Corporation (a producer of gourmet specialty foods), and the stock market. Historical Stock Returns Year Market Blandy Gourmange 1 30% 26% 47% 2 7 15 -54 3 18 -14 15 4 -22 -15 7 5 -14 2 -28 6 10 -18 40 7 26 42 17 8 -10 30 -23 9 -3 -32 -4 10 38 28 75 Average return:

8.0% ? 9.2% Standard deviation:

20.1% ? 38.6%

Correlation with the market:

1.00 ? 0.678 Beta:1.00 ? 1.30 The risk-free rate is 4% and the market risk premium is 5%.

Calculate the correction coefficient between Blandy and the Market. Use this and the previously calculated (or given) standard deviations of Blandy and the market to estimate Blandy