Problem 6-6 (Algo) Consider the following table: Scenario Severe recession Mild recession Normal growth Boom Probability Stock Fund Rate of Return 0.05 -32% Bond Fund Rate of Return -11% 0.25 -12% 17% 0.40 17% 10% 0.30 22% -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.) Answer is complete but not entirely correct. Mean return Variance % 8.8 0.03%2 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.)
Problem 6-6 (Algo) Consider the following table: Scenario Severe recession Mild recession Normal growth Boom Probability Stock Fund Rate of Return 0.05 -32% Bond Fund Rate of Return -11% 0.25 -12% 17% 0.40 17% 10% 0.30 22% -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.) Answer is complete but not entirely correct. Mean return Variance % 8.8 0.03%2 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.)
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:Problem 6-6 (Algo)
Consider the following table:
Scenario
Severe recession
Mild recession
Normal growth
Boom
Probability
Stock Fund
Rate of Return
0.05
-32%
Bond Fund
Rate of Return
-11%
0.25
-12%
17%
0.40
17%
10%
0.30
22%
-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.)
Answer is complete but not entirely correct.
Mean return
Variance
%
8.8
0.03%2
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.)
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