Consider the following table: Scenario Severe recession Mild recession Normal growth Boom Mean return Variance Probability 0.10 0.20 0.35 0.35 12.5 % Stock Fund Rate of Return -38% -6.0% 10% 40% Required: 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 "Variance" to 4 decimal places.) %-Squared Bond Fund Rate of Return -14% 10% 4% 4%
Consider the following table: Scenario Severe recession Mild recession Normal growth Boom Mean return Variance Probability 0.10 0.20 0.35 0.35 12.5 % Stock Fund Rate of Return -38% -6.0% 10% 40% Required: 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 "Variance" to 4 decimal places.) %-Squared Bond Fund Rate of Return -14% 10% 4% 4%
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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Question
![Consider the following table:
Severe recession
Mild recession
Normal growth
Boom
Scenario
Mean return
Variance
Probability
0.10
0.20
0.35
0.35
Covariance
12.5 %
%-Squared
Stock Fund
Rate of Return
Required:
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 "Variance" to 4 decimal places.)
-38%
-6.0%
%-Squared
10%
40%
Bond Fund
Rate of Return
-14%
10%
4%
4%
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.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F4202c8a4-4551-4a94-834d-f92113724a1f%2F41dbd6cd-32c6-4a06-a226-a1947c736e3e%2Fg5puchd_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Consider the following table:
Severe recession
Mild recession
Normal growth
Boom
Scenario
Mean return
Variance
Probability
0.10
0.20
0.35
0.35
Covariance
12.5 %
%-Squared
Stock Fund
Rate of Return
Required:
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 "Variance" to 4 decimal places.)
-38%
-6.0%
%-Squared
10%
40%
Bond Fund
Rate of Return
-14%
10%
4%
4%
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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