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

question 24

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. $$\sum y$$ $$\begin{array} { l l c l l l l l l l l } x : & 12 & 0 & 39 & 25 & 33 & 27 & 28 & - 12 & - 12 & - 25 \\y : & 7 & - 1 & 29 & 15 & 26 & 18 & 15 & - 1 & - 2 & - 7\end{array}$$

• A)106
• B)100
• C)99
• D)101
• E)107

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Definitions:

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