Do Bonds Reduce the Overall Risk of an Investment Portfolio

question 23

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 the sample mean for x and for y. Round your answer to the nearest tenth. $$\begin{array} { l l l l l l l l l l l } x : & 13 & 0 & 37 & 25 & 32 & 27 & 28 & - 13 & - 13 & - 25 \\y & 8 & - 2 & 26 & 16 & 26 & 18 & 16 & - 2 & - 3 & - 8\end{array}$$

• A)and \(\bar { x } = 68.5\) \(\bar { y } = 9.9\)
• B)and \(\bar { x } = 11.1\) \(\bar { y } = 9.5\)
• C)and \(\bar { x } = 161.0\) \(\bar { y } = 10.6\)
• D)and \(\bar { x } = 39.5\) \(\bar { y } = 13.0\)
• E)and \(\bar { x } = 9.5\) \(\bar { y } = 11.1\)

---

Definitions:

Intake Valves

Mechanical components in an engine that open to allow the air/fuel mixture into the combustion chambers during the intake stroke.

S-Cam Brakes

Drum brake system in which the shoes are driven into the drum by rotating an S-shaped cam, spreading the shoes.

Service Brake Torque

The amount of torque applied by the service brake system to slow or stop a vehicle, typically measured at the wheels.

Brake Treadle Valve

A valve operated by a pedal that controls the flow of air or hydraulic fluid to the brakes.