Scenario Probability Severe recession Mild recession 0.10 Rate of Return -34% Rate of Return -9% 0.20 Normal growth Boom -quired: 0.30 -20.0% 21% 5% 9% 0.40 36% 6% Calculate the values of mean return and variance for the stock fund. (Do not round intermediate calculations. Round "Mean turn" value to 1 decimal place and "Variance" to 4 decimal places.) lean return ariance 13.3 % %-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
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Scenario
Probability
Severe recession
Mild recession
0.10
Stock Fund
Rate of Return
-34%
Bond Fund
Rate of Return
-9%
0.20
Normal growth
Boom
Required:
0.30
0.40
-20.0%
21%
36%
5%
9%
6%
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.)
Mean return
Variance
13.3 %
%-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
Transcribed Image Text:Scenario Probability Severe recession Mild recession 0.10 Stock Fund Rate of Return -34% Bond Fund Rate of Return -9% 0.20 Normal growth Boom Required: 0.30 0.40 -20.0% 21% 36% 5% 9% 6% 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.) Mean return Variance 13.3 % %-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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