16.| Investing: Stocks and Bonds Do bonds reduce the overall risk of an invest- ment portfolio? Let x be a random variable representing annual percent return for Vanguard Total Stock Index (all stocks). Let y be a random variable representing annual return for Vanguard Balanced Index (60% stock and 40% bond). For the past several years, we have the following data (Reference: Morningstar Research Group, Chicago): 11 O 36 -11 -11 -21 x: 21 31 23 24 y: 10 -2 29 14 22 18 14 -2 -3 -10 (a) Compute Σχ, Σ , Σy, and Σγ. (b) Use the results of part (a) to compute the sample mean, variance, and standard deviation for x and for y. (c) Compute a 75% Chebyshev interval around the mean for x values and also for y values. Use the intervals to compare the two funds. MOSECTION 3.2 Measures of Variation 117 (d) Interpretation: Compute the coefficient of variation for each fund. Use the coefficients of variation to compare the two funds. If s represents risks and x represents expected return, then s/x can be thought of as a measure of risk per unit of expected return. In this case, why is a smaller CV better? Explain.
16.| Investing: Stocks and Bonds Do bonds reduce the overall risk of an invest- ment portfolio? Let x be a random variable representing annual percent return for Vanguard Total Stock Index (all stocks). Let y be a random variable representing annual return for Vanguard Balanced Index (60% stock and 40% bond). For the past several years, we have the following data (Reference: Morningstar Research Group, Chicago): 11 O 36 -11 -11 -21 x: 21 31 23 24 y: 10 -2 29 14 22 18 14 -2 -3 -10 (a) Compute Σχ, Σ , Σy, and Σγ. (b) Use the results of part (a) to compute the sample mean, variance, and standard deviation for x and for y. (c) Compute a 75% Chebyshev interval around the mean for x values and also for y values. Use the intervals to compare the two funds. MOSECTION 3.2 Measures of Variation 117 (d) Interpretation: Compute the coefficient of variation for each fund. Use the coefficients of variation to compare the two funds. If s represents risks and x represents expected return, then s/x can be thought of as a measure of risk per unit of expected return. In this case, why is a smaller CV better? Explain.
MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
Section: Chapter Questions
Problem 1P
Related questions
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Transcribed Image Text:16.| Investing: Stocks and Bonds Do bonds reduce the overall risk of an invest-
ment portfolio? Let x be a random variable representing annual percent
return for Vanguard Total Stock Index (all stocks). Let y be a random variable
representing annual return for Vanguard Balanced Index (60% stock and 40%
bond). For the past several years, we have the following data (Reference:
Morningstar Research Group, Chicago):
11
O 36
-11
-11 -21
x:
21 31 23
24
y:
10
-2 29
14 22 18
14
-2
-3 -10
(a) Compute Σχ, Σ , Σy, and Σγ.
(b) Use the results of part (a) to compute the sample mean, variance, and
standard deviation for x and for
y.
(c) Compute a 75% Chebyshev interval around the mean for x values and
also for y values. Use the intervals to compare the two funds.
Transcribed Image Text:MOSECTION 3.2 Measures of Variation
117
(d) Interpretation: Compute the coefficient of variation for each fund. Use
the coefficients of variation to compare the two funds. If s represents
risks and x represents expected return, then s/x can be thought of as a
measure of risk per unit of expected return. In this case, why is a smaller
CV better? Explain.
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