Question
In: Finance
Consider the following probability distribution for Stock Fund (S) and Bond Fund (B). State Probability Return...
Consider the following probability distribution for Stock Fund (S) and Bond Fund (B).
|
State |
Probability |
Return on Bond Fund |
Return on Stock Fund |
|
1 |
.2 |
-10% |
20% |
|
2 |
.4 |
10% |
30% |
|
3 |
.4 |
18% |
-10% |
The expected return and the standard deviation of the Stock Fund are 12% and 18.33%, respectively.
What is the expected return of Bond Fund?
|
8.2% |
||
|
8.5% |
||
|
8.9% |
||
|
9.2% |
||
|
9.6% |
What is the standard deviation of Bond Fund?
|
8.57% |
||
|
9.23% |
||
|
9.45% |
||
|
10.25% |
||
|
12.78% |
What is the covariance between the Stock Fund and the Bond Fund?
|
-102.4 |
||
|
-96.2 |
||
|
-85.5 |
||
|
-53.7 |
||
|
-41.3 |
What is the correlation coefficient between the Stock Fund and the Bond Fund?
|
-0.55 |
||
|
-0.45 |
||
|
-0.33 |
||
|
-0.23 |
||
|
-0.10 |
Solutions
jeff jeffy answered 7 months agoRelated Solutions
Consider the following probability distribution for stocks A and B: State Probability Return on Stock A...
Consider the following probability distribution for stocks A and
B:
State
Probability
Return on Stock A
Return on Stock B
1
0.10
10
%
8
%
2
0.20
13
%
7
%
3
0.20
12
%
6
%
4
0.30
14
%
9
%
5
0.20
15
%
8
%
Let G be the global minimum variance portfolio. The weights of A
and B in G are ________ and ________, respectively.
Consider the following probability distribution for stocks A and B: State Probability Return on A Return...
Consider the following probability distribution for stocks A and
B:
State
Probability
Return on A
Return on B
1
.15
8%
8%
2
.2
13%
7%
3
.15
12%
6%
4
.3
14%
9%
5
.2
16%
11%
If you invest 35% of your portfolio in stock A, and the rest
(65%) in stock B, what would be your portfolio's standard
deviation? Please enter your answer in percent rounded to the
nearest basis point.
Consider the following table: Stock Fund Bond Fund Scenario Probability Rate of Return Rate of Return...
Consider the following table:
Stock Fund
Bond Fund
Scenario
Probability
Rate of Return
Rate of Return
Severe recession
0.10
–43
%
–10
%
Mild recession
0.20
–23
%
16
%
Normal growth
0.40
28
%
9
%
Boom
0.30
33
%
–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 2 decimal places.)
b.Calculate the value of the covariance...
Consider the following table: Stock Fund Bond Fund Scenario Probability Rate of Return Rate of Return...
Consider the following table:
Stock Fund
Bond Fund
Scenario
Probability
Rate of Return
Rate of Return
Severe recession
0.05
−41%
−18%
Mild recession
0.20
−11.0%
14%
Normal growth
0.30
8%
5%
Boom
0.45
34%
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.)
b. Calculate the value of the covariance between
the stock and bond funds....
Consider the following table: Stock Fund Bond Fund Scenario Probability Rate of Return Rate of Return...
Consider the following table:
Stock
Fund
Bond Fund
Scenario
Probability
Rate of
Return
Rate of
Return
Severe recession
0.10
?30%
?11%
Mild recession
0.15
?12%
8%
Normal growth
0.35
6%
2%
Boom
0.40
39%
5%
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
________
b. Calculate the value of the covariance...
Consider the following table: Stock Fund Bond Fund Scenario Probability Rate of Return Rate of Return...
Consider the following table:
Stock Fund
Bond Fund
Scenario
Probability
Rate of Return
Rate of Return
Severe recession
0.05
–25
%
–10
%
Mild recession
0.25
–5
%
16
%
Normal growth
0.40
10
%
9
%
Boom
0.30
15
%
–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 2 decimal places.)
b.Calculate the value of the covariance...
Consider the following table: Stock Fund Bond Fund Scenario Probability Rate of Return Rate of Return...
Consider the following table:
Stock Fund
Bond Fund
Scenario
Probability
Rate of Return
Rate of Return
Severe recession
0.10
−32%
−17%
Mild recession
0.15
−22.0%
15%
Normal growth
0.35
14%
6%
Boom
0.40
35%
4%
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.)
PLEASE USE EXCEL AND PROVIDE FORMULA VIEW
Consider the following table:
Stock Fund...
Consider the following table: Stock Fund Bond Fund Scenario Probability Rate of Return Rate of Return...
Consider the following table:
Stock Fund
Bond Fund
Scenario
Probability
Rate of Return
Rate of Return
Severe recession
0.05
−46%
−16%
Mild recession
0.20
−22.0%
11%
Normal growth
0.30
5%
2%
Boom
0.45
42%
5%
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....
Consider the following table: Stock Fund Bond Fund Scenario Probability Rate of Return Rate of Return...
Consider the following table:
Stock Fund
Bond Fund
Scenario
Probability
Rate of Return
Rate of Return
Severe recession
.10
–37%
–9%
Mild recession
.20
–11%
15%
Normal growth
.35
14%
8%
Boom
.35
30%
–5%
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
b. Calculate the value of the covariance between
the...
Consider the following table: Stock Fund Bond Fund Scenario Probability Rate of Return Rate of Return...
Consider the following table: Stock Fund Bond Fund Scenario
Probability Rate of Return Rate of Return Severe recession 0.05 –40
% –9 % Mild recession 0.25 –14 % 15 % Normal growth 0.40 17 % 8 %
Boom 0.30 33 % –5 % 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...
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