Question

Do bonds reduce the overall risk of an investment portfolio? Let x be a random variable representing annual percent return for the Vanguard Total Stock Index (all Stocks). Let y be a random variable representing annual return for the Vanguard Balanced Index (60% stock and 40% bond). For the past several years, assume the following data. Compute the coefficient of variation for each fund. Round your answers to the nearest tenth.

x:	13	0	38	23	35	25	26	-13	-13	-16
y:	7	-2	26	16	24	16	16	-2	-3	-7

Select one:

a. for x-values: 108.6%, and for y-values: 132.4%

b. for x-values: 194.1%, and for y-values: 132.4%

c. for x-values: 194.1%, and for y-values: 236.8%

d. for x-values: 132.4,% and for y-values: 194.1%

e. for x-values: 108.6%, and for y-values: 236.8%

Answer 1

Ans:

Coefficient of variation=100*(x-bar/s)

											mean(x-bar)	std. dev.(s)	COV
x:	13	0	38	23	35	25	26	-13	-13	-16	11.8	20.735	175.7%
y:	7	-2	26	16	24	16	16	-2	-3	-7	9.1	12.050	132.4%