0.50 points Consider the following table k Fund -40% 25% Bond Fund Rate of Retun Severe recession Mild recession Normal growth Boom ? 10 0 20 0 40 0.30 13% 19% 12% 11-9% -20% 30% 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 2 decimal places.) Mean return Variance 0639 %-squared b. Calculate the value of the covariance between the stock and bond funds. (Negative value should be indicated by a minus sign. Do intermediate calculations. Round your answer to 2 decimal places.) Covariance References eBook & Resources \'08-02 Learning Objective Calculate mean variance and covarliance using either historical data or scenario analysis Worksheet xD Type here to search Solution Statement showing computation of covariance (A) (B) C (D) (E) (F) Deviation from Mean Return (Given Return - Expected Return) Col. C * Col. D Col. B * Col. E Scenario Probability Stock Fund Bond fund Severe Recession 0.1 -0.51 -0.176 0.08976 0.008976 Mild Recession 0.2 -0.31 0.144 -0.04464 -0.008928 Normal Growth 0.4 0.14 0.074 0.01036 0.004144 Boom 0.3 0.19 -0.136 -0.02584 -0.007752 Covariance -0.00356 Expected Return of Stock Fund : 11% Expected Return of Bond Fund : (-13)*0.1+19*0.2+12*0.4+(- 9)*0.3 = 4.6%.

1. 0.50 points Consider the following table k Fund -40% 25% Bond Fund Rate of Retun Severe
recession Mild recession Normal growth Boom ? 10 0 20 0 40 0.30 13% 19% 12% 11-9% -20%
30% 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 2
decimal places.) Mean return Variance 0639 %-squared b. Calculate the value of the covariance
between the stock and bond funds. (Negative value should be indicated by a minus sign. Do
intermediate calculations. Round your answer to 2 decimal places.) Covariance References
eBook & Resources '08-02 Learning Objective Calculate mean variance and covarliance using
either historical data or scenario analysis Worksheet xD Type here to search
Solution
Statement showing computation of covariance (A) (B) C (D) (E) (F) Deviation from
Mean Return (Given Return - Expected Return) Col. C * Col. D Col. B * Col. E Scenario
Probability Stock Fund Bond fund Severe Recession 0.1 -0.51 -0.176 0.08976 0.008976 Mild
Recession 0.2 -0.31 0.144 -0.04464 -0.008928 Normal Growth 0.4 0.14 0.074 0.01036
0.004144 Boom 0.3 0.19 -0.136 -0.02584 -0.007752 Covariance -0.00356 Expected
Return of Stock Fund : 11% Expected Return of Bond Fund : (-13)*0.1+19*0.2+12*0.4+(-
9)*0.3 = 4.6%