Question: 4. For the table below, change the probabilities for the different economic scenarios to the following. Severe Recession probability = 10%, Mild Recession probability =

4. For the table below, change the probabilities for the different economic scenarios to the following. Severe Recession probability = 10%, Mild Recession probability = 30%, Normal Growth probability = 35%, Boom probability = 25%. Using Excel, calculate the mean returns for the stock fund and the bond fund using these probabilities. A B 1 2 3 4 5 6 7 D E F Stock Fund Bond Fund Rate of Return Col B x Col Rate of Return Col B x Col E -37 -1.9 -9 -0.45 -2.8 15 3.8 14 5.6 8 3.2 30 9.0 -5 -1.5 SUM: 10.0 SUM: 5.0 Scenario Probability Severe recession .05 Mild recession .25 Normal growth .40 Boom .30 Expected or Mean Return: -11
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