Assignment 5
Consider the following table: |
| | Stock Fund | Bond Fund |
Scenario | Probability | Rate of Return | Rate of Return |
Severe recession | 0.10 | ?46% | ?16% |
Mild recession | 0.25 | ?22% | 11% |
Normal growth | 0.40 | 5% | 2% |
Boom | 0.25 | 42% | 5% |
b. | 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.) |
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. Round your answer to 4 decimal places.) |