Stock Fund Bond Fund Scenario Probabi lity Rate of Return Rate of Return Severe recession 0.05 -40% -9 % Mild recession 0.25 -14 % 15 % Normal growth 0.40 17 % 8 % Boom 0.30 33 % -5% 1) Calculate the values of mean return and variance for the stock fund. 2) Calculate the value of the covariance between the stock and bond funds. Question 2 The standard deviation of the market-index portfolio is 15%. Stock A has a beta of 2.00 and a residual standard deviation of 25%. 1) Calculate the total variance for an increase of 0.20 in its beta. 2) Calculate the total variance for an increase of 3.53% in its residual standard deviation