Problem 6-6 (Algo) Consider the following table: Scenario Severe recession Mild recession Normal growth Boom Mean return Variance Probability 0.10 % 0.20 0.40 0.30 Stock Fund Rate of Return -37% -17% 22% 27% Bond 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 2 decimal places.) -10% 16% 9% -6%

Problem 6-6 (Algo) Consider the following table: Scenario Severe recession Mild recession Normal growth Boom Mean return Variance Probability 0.10 % 0.20 0.40 0.30 Stock Fund Rate of Return -37% -17% 22% 27% Bond 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 2 decimal places.) -10% 16% 9% -6%

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 26P

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Consider the following table: Scenario Probability Stock FundRate of Return Bond FundRate of Return Severe recession 0.10 −30% −11% Mild recession 0.15 −12.0% 8% Normal growth 0.35 6% 2% Boom 0.40 39% 5% 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.) 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 Probability Stock FundRate of Return Bond FundRate of Return Severe recession 0.10 −43% −12% Mild recession 0.20 −17.0% 12% Normal growth 0.30 17% 6% Boom 0.40 31% 4% 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.) b. Calculate the value of the covariance between the stock and bond funds
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Consider the following table: Scenario Severe recession Mild recession Normal growth Boom Probability 0.05 0.25 0.40 0.30 Stock Fund Rate of Return -32% -12% 17% 22% Bond Fund Rate of Return -11% 17% 10% -7% a. Calculate the values of mean return (or called expected return) and variance for the stock fund. (Do not round intermediate calculations. Round "Mean return" value to 1 decimal place and "Variance" to 2 decimal places.) (Hint: Recall the formula on Page 29 (Example: Volatility of a Two-Stock Portfolio) of Slides of Lecture 2a) b. Calculate the value of the covariance between the stock and bond funds. (Negative
Consider the following table: Scenario Severe recession Mild recession Normal growth Boom Required: Probability 0.10 Stock Fund Rate of Return -39% Bond Fund Rate of Return -12% 0.20 -19% 18% 0.40 24% 11% 0.30 29% -8% 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 2 decimal places.) Mean return Variance 10.6 % 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 2 decimal places.) Covariance
Problem 6-6 (Algo) Consider the following table: Scenario Probability Stock Fund Rate of Return Bond Fund Rate of Return Severe recession 0.10 -44% -11% Mild recession 0.20 -24% 17% Normal growth 0.40 29% 10% Boom 0.30 34% -7% 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 2 decimal places.) 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 2 decimal places.)
Consider the following table: Severe recession Mild recession Normal growth Boom Scenario Mean return Variance Covariance Probability 0.05 0.25 % 0.40 0.30 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 2 decimal places.) -26% -6% 11% 16% Bond Fund Rate of Return -11% 17% 10% -7% 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 2 decimal places.)
Consider the following table: Scenario Probability Stock Fund Rate of Return Bond Fund Rate of Return Severe recession 0.05-33%-12% Mild recession 0.25 -13% 18% Normal growth 0.40 18% 11% Boom 0.30 23%-8% 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 2 decimal places.) 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 2 decimal places.)
Consider the following table: Stock Fund Bond Fund Scenario Probability Rate of Return Rate of Return Severe recession 0.05 –27 % –12 % Mild recession 0.25 –7 % 18 % Normal growth 0.40 12 % 11 % Boom 0.30 17 % –8 % 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 2 decimal places.) mean return: variance: 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 2 decimal places.)vovariance:
Consider the following table: Stock Fund Bond Fund Scenario Probability Rate of Return Rate of Return Severe recession 0.05 –28 % –13 % Mild recession 0.25 –8 % 19 % Normal growth 0.40 13 % 12 % Boom 0.30 18 % –9 % 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 2 decimal places.) 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 2 decimal places.)