Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Scenario
Probability
Severe recession
Mild recession
0.05
Stock Fund
Rate of Return
-41%
Bond Fund
Rate of Return
-18%
0.20
Normal growth
Boom
Required:
0.30
0.45
-11.0%
8%
34%
14%
5%
6%
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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Transcribed Image Text:Scenario Probability Severe recession Mild recession 0.05 Stock Fund Rate of Return -41% Bond Fund Rate of Return -18% 0.20 Normal growth Boom Required: 0.30 0.45 -11.0% 8% 34% 14% 5% 6% 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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