Question

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	−10.0%	6%
Normal growth	0.35	22%	10%
Boom	0.40	37%	−7%

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	%-Squared

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             %-Squared

Answer 1