Consider the following table: Scenario Severe recession Mild recession Normal growth Boom Mean return Variance Probability 0.05 0.25 0.40 0.30 % Stock Fund Rate of Return -26% -6% 11% 16% Bond Fund Rate of Return Required: 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.) -11% 17% 10% -7%

Consider the following table: Scenario Severe recession Mild recession Normal growth Boom Mean return Variance Probability 0.05 0.25 0.40 0.30 % Stock Fund Rate of Return -26% -6% 11% 16% Bond Fund Rate of Return Required: 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.) -11% 17% 10% -7%

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Consider the following table: Scenario Probability Stock FundRate of Return Bond FundRate of Return Severe recession 0.10 −30% −11% Mild recession 0.15 −12.0% 8% Normal growth 0.35 6% 2% Boom 0.40 39% 5% Required: 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.) 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.)
Consider the following table: Scenario Probability Stock FundRate of Return Bond FundRate of Return Severe recession 0.10 −43% −12% Mild recession 0.20 −17.0% 12% Normal growth 0.30 17% 6% Boom 0.40 31% 4% Required: 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.) b. Calculate the value of the covariance between the stock and bond funds
Consider the following table: Scenario Severe recession Mild recession Normal growth Boom Probability 0.05 0.25 0.40 0.30 Stock Fund Rate of Return -32% -12% 17% 22% Bond Fund Rate of Return -11% 17% 10% -7% a. Calculate the values of mean return (or called expected 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.) (Hint: Recall the formula on Page 29 (Example: Volatility of a Two-Stock Portfolio) of Slides of Lecture 2a) b. Calculate the value of the covariance between the stock and bond funds. (Negative
Consider the following table: Scenario Severe recession Mild recession Normal growth Boom Required: Probability 0.05 Stock Fund Rate of Return -33% Bond Fund Rate of Return -12% 0.25 -13% 18% 0.40 18% 11% 0.30 23% -8% 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 % 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 2 decimal places.) Covariance
Consider the following table: Stock Fund Bond Fund Scenario Probability Rate of Return Rate of Return Severe recession 0.05 –27 % –12 % Mild recession 0.25 –7 % 18 % Normal growth 0.40 12 % 11 % Boom 0.30 17 % –8 % 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: 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 2 decimal places.)vovariance:
Consider the following table: Scenario Severe recession Mild recession Normal growth Boom Mean return Variance Probability 0.15 0.20 0.35 0.30 Covariance Answer is not complete. 3.3 % %- Squared Stock Fund Rate of Return. Required: 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.) Answer is not complete. -34% -18.5% %- Squared 148 24% Bond Fund Rate of Return. -10% 68 7% 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.) -38
Consider the following table: Stock Fund Bond Fund Rate of Rate of Scenario Probability Return Return Severe 0.05 -38% -8% recession Mild recession 0.25 8% -16% Normal growth 0.40 18% 5% Boom 0.30 32% -5% 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 Variance c. Calculate the value of the covariance between the stock and bond funds. (Negative value should be indicated bya minus sign. Do not round intermediate calculations. Enter your answer as a decimal number rounded to 4 decimal places.) Covariance
Consider the following information: Rate of Return If State Occurs State of Probability of State of Economy Stock A Stock B Economy Recession Normal .17 .05 .09 21 .62 .08 .25 Boom .21 16 a. Calculate the expected return for Stocks A and B. (Do not round Intermediate calculations and enter your answers as a percent rounded to 2 declmal places, e.g., 32.16.) b. Calculate the standard deviation for Stocks A and B. (Do not round Intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) a. Stock A expected return Stock B expected return b. Stock A standard deviation Stock B standard deviation
Suppose your expectations regarding the stock market are as follows: State of the Economy Boom Normal growth Recession E(r) p(s)r(s) = Probability HPR 0.4 43% 0.5 23 0.1 -16 Var (r) = P(s)[r(s) - E(r)]² = SD (r) ==√√Var (r) Required: Use above equations to compute the mean and standard deviation of the HPR on stocks. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Mean Standard deviation % %
Use the following information on states of the economy and stock returns to calculate the standard deviation of returns. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Probability of State of Security Return if State Occurs State of Economy Economy 0.40 Recession Normal -5.50% 11.00 0.40 0.20 Вoom 17.00
Consider the following information: Rate of Return If State Occurs State of Probability of State of Economy Stock A Economy Stock B Recession .15 .06 - 10 Normal .56 .09 .19 Вoom .29 .14 .36 . Calculate the expected return for Stocks A and B. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) . Calculate the standard deviation for Stocks A and B. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Stock A expected return % Stock B expected return % Stock A standard deviation % Stock B standard deviation %
Suppose your expectations regarding the stock market are as follows: State of the Economy Boom Normal growth Recession Probability 0.3 0.4 0.3 Mean Standard deviation E (r) Σ=1p(s)r(s) Var (r) = o² = Σ³-1 P (s)[r (s) — E (r)]² - SD (r) = o = √Var (r) Required: Use above equations to compute the mean and standard deviation of the HPR on stocks. (Do not round intermediate calculations. Round your answers to 2 decimal places.) 14.00% 23.24% HPR X 2 decimal places required. 44% 14 -16

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