Do Bonds Reduce the Overall Risk of an Investment Portfolio $$\sum x$$

question 3

Multiple Choice

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. $$\sum x$$ $$\begin{array} { l l l l l l l l l l l } x : & 14 & 0 & 36 & 24 & 31 & 26 & 27 & - 14 & - 14 & - 24 \\y : & 8 & - 1 & 26 & 17 & 25 & 18 & 17 & - 1 & - 2 & - 8\end{array}$$

• A)134
• B)106
• C)154
• D)75
• E)130

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Definitions:

Economic

Relating to the economy or the study of how societies use resources to produce and distribute goods and services.

Degree of Rivalry

The intensity of competition among existing competitors in a market.

Threat of New Entrants

The potential risk posed by the possibility of new companies entering a market, which can impact the competitive environment and profitability for existing players.

Bargaining Power

The leverage that a party has in negotiations, affecting the terms and conditions of agreements.