*8 You plan to invest $1,000 in a corporate bond fund or in a common stock fund. The information to the right about the annual return (per $1,000) of each of these investments under different economic conditions is available, along with the probability that each of these economic conditions will occur. Complete parts (a) through (c) below. Common Economic Corporate Stock Fund -999 - 300 - 150 150 200 350 Probability Condition 0.01 Bond Fund Extreme recession - 250 - 60 30 0.09 0.20 0.30 0.35 0.05 Recession Stagnation Slow growth Moderate growth High growth 80 90 110 a. Compute the expected return for the corporate bond fund and for the common stock fund. b. Compute the standard deviation for the corporate bond fund and for the common stock fund. c. Would you invest in the corporate bond fund or the common stock fund? Explain. Based on the expected value, the ---corporate bond/common stock) fund should be chosen. Since the standard deviation for the common stock fund is--- (about the same as/less than half as much as/more than three times greater than) that for the corporate bond fund, the common stock fund-- (has the same risk as/is safer than/is riskier than) the corporate fund and an investor -- (should carefully weight/doesn't need to consider) the risk when making a decision. Show transcribed imege text
*8 You plan to invest $1,000 in a corporate bond fund or in a common stock fund. The information to the right about the annual return (per $1,000) of each of these investments under different economic conditions is available, along with the probability that each of these economic conditions will occur. Complete parts (a) through (c) below. Common Economic Corporate Stock Fund -999 - 300 - 150 150 200 350 Probability Condition 0.01 Bond Fund Extreme recession - 250 - 60 30 0.09 0.20 0.30 0.35 0.05 Recession Stagnation Slow growth Moderate growth High growth 80 90 110 a. Compute the expected return for the corporate bond fund and for the common stock fund. b. Compute the standard deviation for the corporate bond fund and for the common stock fund. c. Would you invest in the corporate bond fund or the common stock fund? Explain. Based on the expected value, the ---corporate bond/common stock) fund should be chosen. Since the standard deviation for the common stock fund is--- (about the same as/less than half as much as/more than three times greater than) that for the corporate bond fund, the common stock fund-- (has the same risk as/is safer than/is riskier than) the corporate fund and an investor -- (should carefully weight/doesn't need to consider) the risk when making a decision. Show transcribed imege text
MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
Section: Chapter Questions
Problem 1P
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Transcribed Image Text:#3 You plan to invest $1,000 in a corporate bond fund or in a common stock fund. The information to the
right about the annual return (per $1,000) of each of these investments under different economic
conditions is available, along with the probability that each of these economic conditions will occur.
Complete parts (a) through (c) below.
Economic
Probability Condition
0.01
Corporate
Bond Fund
Extreme recession - 250
- 60
Common
Stock
Fund
- 999
- 300
0.09
Recession
0.20
0.30
0.35
Stagnation
Slow growth
Moderate growth
High growth
30
80
90
110
- 150
150
200
350
0.05
a. Compute the expected return for the corporate bond fund and for the common stock fund.
b. Compute the standard deviation for the corporate bond fund and for the common stock fund.
c. Would you invest in the corporate bond fund or the common stock fund? Explain.
Based on the expected value, the
the standard deviation for the common stock fund is --- (about the same as/less than half as much
as/more than three times greater than) that for the corporate bond fund, the common stock fund --- (has
the same risk as/is safer than/is riskier than) the corporate fund and an investor -- (should carefully
weight/doesn't need to consider) the risk when making a decision.
(corporate bond/common stock) fund should be chosen. Since
Show transcribed image text
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