how do I calculate the product of the deviations so that I can get the Covariance number for the Bond or the stock? ProbabilityStock Fund Rate of ReturnJxK-ProbabilityxRate of ReturnSquared Deviation(diff from the mean returns)Variance (Probability X Squared Deviation)Bond fund Rate of ReturnJxK-ProbabilityxRate of ReturnSquared Deviation(diff from the mean returns)Variance (Probability X Squared Deviation)Severe0.1-34-3.42237.29223.729-9.00-0.9201.6420.164Mild0.2-20-41108.89221.7785.00125.005Normal0.3216.359.2917.7879.002.781.0024.3Boom0.43614.4515.29206.1166.002.436.0014.4Expected or Mean Return 13.3 669.41Expected or Mean Return5.20 63.864 Standard Deviation 25.87295886 7.99149548

Data given: Probability Stock Fund Rate of Return A B 0.1 -34% 0.2 -20% 0.3 21% 0.4 36%…

Answered: how do I calculate the product of the…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter2: Risk And Return: Part I

Section: Chapter Questions

Problem 12MC

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how do I calculate the product of the deviations so that I can get the Covariance number for the Bond or the stock?

	Probability	Stock Fund Rate of Return	JxK-ProbabilityxRate of Return	Squared Deviation(diff from the mean returns)	Variance (Probability X Squared Deviation)	Bond fund Rate of Return	JxK-ProbabilityxRate of Return	Squared Deviation(diff from the mean returns)	Variance (Probability X Squared Deviation)
Severe	0.1	-34	-3.4	2237.29	223.729	-9.00	-0.9	201.64	20.164
Mild	0.2	-20	-4	1108.89	221.778	5.00	1	25.00	5
Normal	0.3	21	6.3	59.29	17.787	9.00	2.7	81.00	24.3
Boom	0.4	36	14.4	515.29	206.116	6.00	2.4	36.00	14.4
Expected or Mean Return			13.3		669.41	Expected or Mean Return	5.20		63.864
			Standard Deviation		25.87295886				7.99149548

Expert Solution

Step 1

Data given:

Probability	Stock Fund Rate of Return
A	B
0.1	-34%
0.2	-20%
0.3	21%
0.4	36%

Probability	Bond Fund Rate of Return
A	B
0.1	-9%
0.2	5%
0.3	9%
0.4	6%

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