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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 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 ______

Solutions

Expert Solution

refer to the images for the solution and formulas used in each cell

jeff jeffy answered 2 years ago
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