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

Expert Solution

jeff jeffy answered 1 month ago

Next > < Previous

Related 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...

Subjects