Do Bonds Reduce the Overall Risk of an Investment Portfolio

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 $\bar { x } = 9.5$ $\bar { y } = 11.1$