In: Finance
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 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.)