Consider the following table: Scenario Severe recession Mild recession Normal growth Boom Mean return Variance Probability 0.06 0.33 0.44 0.17 a. Calculate the values of mean return and variance for the stock fund. (Do not round intermediate calculations. Round "Mean return" value to 2 decimal places and "Variance" to 4 decimal places.) Covariance Stock Fund Rate of Return -38% -7% 17% 39% % Bond Fund Rate of Return -28% 5% 9% 9% b. Calculate the value of the covariance between the stock and bond funds. (Negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 4 decimal places.)
Consider the following table: Scenario Severe recession Mild recession Normal growth Boom Mean return Variance Probability 0.06 0.33 0.44 0.17 a. Calculate the values of mean return and variance for the stock fund. (Do not round intermediate calculations. Round "Mean return" value to 2 decimal places and "Variance" to 4 decimal places.) Covariance Stock Fund Rate of Return -38% -7% 17% 39% % Bond Fund Rate of Return -28% 5% 9% 9% b. Calculate the value of the covariance between the stock and bond funds. (Negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 4 decimal places.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Rahul
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Transcribed Image Text:Consider the following table:
Scenario
Severe recession
Mild recession
Normal growth
Boom
Mean return
Variance
Probability
0.06
0.33
0.44
0.17
a. Calculate the values of mean return and variance for the stock fund. (Do not round intermediate calculations. Round "Mean return" value
to 2 decimal places and "Variance" to 4 decimal places.)
Covariance
Stock Fund
Rate of Return
-38%
-7%
17%
39%
%
Bond Fund
Rate of Return
-28%
5%
9%
9%
b. Calculate the value of the covariance between the stock and bond funds. (Negative value should be indicated by a minus sign. Do not round
intermediate calculations. Round your answer to 4 decimal places.)
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