Consider the following probability distribution for Stock Fund (S) and Bond Fund (B). State Probability Return on Bond Fund Return...

60.1K

Verified Solution

Question

Finance

Consider the following probabilitydistribution 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 Fundare 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 BondFund?
-102.4
-96.2
-85.5
-53.7
-41.3
What is the correlation coefficient between the Stock Fund andthe Bond Fund?
-0.55
-0.45
-0.33
-0.23
-0.10

Answer & Explanation Solved by verified expert

3.7 Ratings (290 Votes)

See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

Consider the following probabilitydistribution for Stock Fund (S) and Bond Fund (B).StateProbabilityReturn on Bond FundReturn on Stock Fund1.2-10%20%2.410%30%3.418%-10%The expected return and the standard deviation of the Stock Fundare 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 BondFund?-102.4-96.2-85.5-53.7-41.3What is the correlation coefficient between the Stock Fund andthe Bond Fund?-0.55-0.45-0.33-0.23-0.10

State	Probability	Return on Bond Fund	Return on Stock Fund
1	.2	-10%	20%
2	.4	10%	30%
3	.4	18%	-10%