Do bonds reduce the overall risk of an investment 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. LUSE SALT (a) Compute Σx, Σχ2, ΣΥ, ΣΥ?. Ex xx² x: 15 0 24 28 15 17 36 -9 -16 -16 y: 21 -8 27 10 10 27 22 -2 -3 -1 Ey 103 X s² (b) Use the results of part (a) to compute the sample mean, variance, and standard deviation for x and for y. (Round your answers to four decimal places.) y S X Lower Limit Upper Limit CV x X x (c) Compute a 75% Chebyshev interval around the mean for x values and also for y values. (Round your answers to two decimal places.) X X x x y Use the intervals to compare the two funds. O 75% of the returns for the balanced fund fall within a narrower range than those of the stock fund. O 75% of the returns for the stock fund fall within a narrower range than those of the balanced fund. O 25% of the returns for the balanced fund fall within a narrower range than those of the stock fund. O 25% of the returns for the stock fund fall within a wider range than those of the balanced fund. X X (d) Compute the coefficient of variation for each fund. (Round your answers to the nearest whole number.) y % % Use the coefficients of variation to compare the two funds. O For each unit of return, the stock fund has lower risk. O For each unit of return, the balanced fund has lower risk. O For each unit of return, the funds have equal risk. 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. A smaller CV is better because it indicates a higher risk per unit of expected return. A smaller CV is better because it indicates a lower risk per unit of expected return.
Do bonds reduce the overall risk of an investment 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. LUSE SALT (a) Compute Σx, Σχ2, ΣΥ, ΣΥ?. Ex xx² x: 15 0 24 28 15 17 36 -9 -16 -16 y: 21 -8 27 10 10 27 22 -2 -3 -1 Ey 103 X s² (b) Use the results of part (a) to compute the sample mean, variance, and standard deviation for x and for y. (Round your answers to four decimal places.) y S X Lower Limit Upper Limit CV x X x (c) Compute a 75% Chebyshev interval around the mean for x values and also for y values. (Round your answers to two decimal places.) X X x x y Use the intervals to compare the two funds. O 75% of the returns for the balanced fund fall within a narrower range than those of the stock fund. O 75% of the returns for the stock fund fall within a narrower range than those of the balanced fund. O 25% of the returns for the balanced fund fall within a narrower range than those of the stock fund. O 25% of the returns for the stock fund fall within a wider range than those of the balanced fund. X X (d) Compute the coefficient of variation for each fund. (Round your answers to the nearest whole number.) y % % Use the coefficients of variation to compare the two funds. O For each unit of return, the stock fund has lower risk. O For each unit of return, the balanced fund has lower risk. O For each unit of return, the funds have equal risk. 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. A smaller CV is better because it indicates a higher risk per unit of expected return. A smaller CV is better because it indicates a lower risk per unit of expected return.
A First Course in Probability (10th Edition)
10th Edition
ISBN:9780134753119
Author:Sheldon Ross
Publisher:Sheldon Ross
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Do bonds reduce the overall risk of an investment 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.
x: |
15
|
0
|
24
|
28
|
15
|
17
|
36
|
−9
|
−16
|
−16
|
y: |
21
|
−8
|
27
|
10
|
10
|
27
|
22
|
−2
|
−3
|
−1
|

Transcribed Image Text:Do bonds reduce the overall risk of an investment 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.
(a) Compute Σx, Σχ2, Σy, Σyλ.
186 Σχιζ
Ex
ΣΥ 103
x
S²
x: 15 0 24 28 15 17 36 -9 -16 -16
y: 21 -8 27 10 10 27 22 -2 -3 -1
USE SALT
(b) Use the results of part (a) to compute the sample mean, variance, and standard deviation for x and for y. (Round your
answers to four decimal places.)
X
y
S
Lower Limit
Upper Limit
X
X
X
CV
(c) Compute a 75% Chebyshev interval around the mean for x values and also for y values. (Round your answers to two
decimal places.)
X
X
X
X
x
x
Use the intervals to compare the two funds.
O 75% of the returns for the balanced fund fall within a narrower range than those of the stock fund..
O 75% of the returns for the stock fund fall within a narrower range than those of the balanced fund.
O 25% of the returns for the balanced fund fall within a narrower range than those of the stock fund.
O 25% of the returns for the stock fund fall within a wider range than those of the balanced fund.
(d) Compute the coefficient of variation for each fund. (Round your answers to the nearest whole number.).
Y
%
%
Use the coefficients of variation to compare the two funds.
O For each unit of return, the stock fund has lower risk.
O For each unit of return, the balanced fund has lower risk.
For each unit of return, the funds have equal risk.
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.
A smaller CV is better because it indicates a higher risk per unit of expected return..
O A smaller CV is better because it indicates a lower risk per unit of expected return.
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