Consider the following table: Scenario Probability Stock Fund Rate of Return Bond Fund 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....

50.1K

Verified Solution

Question

Finance

Consider the following table:
Scenario Probability Stock Fund Rate of Return Bond Fund 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 thestock fund. (Do not round intermediate calculations. Round "Meanreturn" value to 1 decimal place and "Variance" to 2 decimalplaces.)
b. Calculate the value of the covariance between the stock andbond funds (Negative value should be indicated by a minus sign. Donot round intermediate calculations. Round your answer to 2 decimalplaces.)

Answer & Explanation Solved by verified expert

3.6 Ratings (397 Votes)

Please refer to below spreadsheet for 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 table:ScenarioProbabilityStock Fund Rate of ReturnBond Fund Rate of ReturnSevere Recession0.10-43%-10%Mild Recession0.20-23%16%Normal growth0.4028%9%Boom0.3033%-6%a. Calculate the values of mean return and variance for thestock fund. (Do not round intermediate calculations. Round "Meanreturn" value to 1 decimal place and "Variance" to 2 decimalplaces.)b. Calculate the value of the covariance between the stock andbond funds (Negative value should be indicated by a minus sign. Donot round intermediate calculations. Round your answer to 2 decimalplaces.)

Scenario	Probability	Stock Fund Rate of Return	Bond Fund 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%