Consider the following table: |
Stock Fund | Bond Fund | ||
Scenario | Probability | Rate of Return | Rate of Return |
Severe recession | 0.05 | −44% | −13% |
Mild recession | 0.25 | −16% | 11% |
Normal growth | 0.40 | 10% | 4% |
Boom | 0.30 | 30% | 3% |
b. |
Calculate the values of expected return and variance for the stock fund. (Do not round intermediate calculations. Enter "Expected return" value as a percentage rounded to 1 decimal place and "Variance" as decimal number rounded to 4 decimal places.) |
Expected return | % 6.8 |
Variance | |
c. |
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. Enter your answer as a decimal number rounded to 4 decimal places.) |
Covariance |
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