Consider the following table: Stock Fund Bond Fund Scenario Probability Rate of Return Rate of Return Severe recession 0.10 ?32% ?10% Mild recession 0.15 ?10% 6% Normal growth 0.35 22% 10% Boom 0.40 37% 7% a. Calculate the...

80.2K

Verified Solution

Question

Finance

Consider the following table:
Stock Fund Bond Fund
Scenario Probability Rate of Return Rate of Return
Severe recession 0.10 ?32% ?10%
Mild recession 0.15 ?10% 6%
Normal growth 0.35 22% 10%
Boom 0.40 37% 7%

a. Calculate the values of mean return andvariance for the stock fund. (Do not round intermediatecalculations. Round "Mean return" value to 1 decimal place and"Variance" to 2 decimal places.)
Mean return %
Variance

b. Calculate the value of the covariance betweenthe stock and bond funds. (Negative value should beindicated by a minus sign. Do not round intermediate calculations.Round your answer to 2 decimal places.)
Covariance=

Answer & Explanation Solved by verified expert

3.8 Ratings (320 Votes)

Answer aComputation of mean return of Stock fundCalculation of mean return ofStockPossible returnsProbabilityProductXpXX pX0320100320101500150220350077037040148X0178Mean return of stock fundX 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:Stock FundBond FundScenarioProbabilityRate of ReturnRate of ReturnSevere recession0.10?32%?10%Mild recession0.15?10%6%Normal growth0.3522%10%Boom0.4037%7%a. Calculate the values of mean return andvariance for the stock fund. (Do not round intermediatecalculations. Round "Mean return" value to 1 decimal place and"Variance" to 2 decimal places.)Mean return%Varianceb. Calculate the value of the covariance betweenthe stock and bond funds. (Negative value should beindicated by a minus sign. Do not round intermediate calculations.Round your answer to 2 decimal places.)Covariance=

		Stock Fund	Bond Fund
Scenario	Probability	Rate of Return	Rate of Return
Severe recession	0.10	?32%	?10%
Mild recession	0.15	?10%	6%
Normal growth	0.35	22%	10%
Boom	0.40	37%	7%