Consider the following table:
Stock Fund | Bond Fund | ||
Scenario | Probability | Rate of Return | Rate of Return |
Severe recession | 0.20 | −38% | −12% |
Mild recession | 0.20 | −26.0% | 20% |
Normal growth | 0.35 | 8% | 3% |
Boom | 0.25 | 46% | −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
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