Consider the following table: Scenario Severe recession Mild recession Normal growth Boom Required: Probability Stock Fund Rate of Return 0.10 -46% 0.20 -24.0% 0.30 0.40 8% 44% a. Calculate the values of mean return and variance for the stock fund. (Do not round Intermediate calculations. Round "Mean return" value to 1 decimal place and "Varlance" to 4 decimal places.) Mean return Variance % %-Squared 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.) Covariance %-Squared
Consider the following table: Scenario Severe recession Mild recession Normal growth Boom Required: Probability Stock Fund Rate of Return 0.10 -46% 0.20 -24.0% 0.30 0.40 8% 44% a. Calculate the values of mean return and variance for the stock fund. (Do not round Intermediate calculations. Round "Mean return" value to 1 decimal place and "Varlance" to 4 decimal places.) Mean return Variance % %-Squared 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.) Covariance %-Squared
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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Transcribed Image Text:Consider the following table:
Scenario
Severe recession
Mild recession
Normal growth
Boom
Required:
Probability
Stock Fund
Rate of Return
0.10
-46%
0.20
-24.0%
0.30
0.40
8%
44%
a. Calculate the values of mean return and variance for the stock fund.
(Do not round Intermediate calculations. Round "Mean return" value to
1 decimal place and "Varlance" to 4 decimal places.)
Mean return
Variance
%
%-Squared
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.)
Covariance
%-Squared
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