Question

You plan to invest $ 1,000 in a corporate bond fund or in a common stock fund. The following table presents the annual return (per $ 1,000) of each of these investments under various economic conditions and the probability that each of those economic conditions will occur. Compute the
a. Expected return for the corporate bond fund and for the common stock fund.
b. Standard deviation for the corporate bond fund and for the common stock fund.
c. Would you invest in the corporate bond fund or the common stock fund? Explain.
d. If you chose to invest in the common stock fund in (c), what do you think about the possibility of losing $ 999 of every $ 1,000 invested if there is an extreme recession?


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  • CreatedJuly 16, 2015
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