You plan to invest $1,000 in a corporate bond fund or in a common stock fund. The

Question:

You plan to invest $1,000 in a corporate bond fund or in a fund. The following table presents the annual return

(per $1,000) of each of these investments under various economic conditions and the probability that each of those economic conditions will occur. Compute the
a. Expected return for the corporate bond fund and for the common stock fund.
b. Standard deviation for the corporate bond fund and for the common stock fund.
c. Covariance of the corporate bond fund and the common stock fund.
d. Would you invest in the corporate bond fund or the common stock fund? Explain.
e. If you chose to invest in the common stock fund in (d), what do you think about the possibility of losing $999 of every $1,000 invested if there is an extreme recession?

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these...