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. The sample means for x and y are 11.00 and 8.90, respectively.
$$\begin{array} { l l l l l l l l l l l } x : & 12 & 0 & 37 & 24 & 32 & 26 & 27 & - 12 & - 12 & - 24 \\y : & 9 & - 3 & 26 & 15 & 25 & 18 & 15 & - 3 & - 4 & - 9\end{array}$$ Compute the coefficient of variation for each fund. Round your answers to the nearest tenth.

A) for x-values: , and for y-values: $116.5 \%$ $144.0 \%$
B) for x-values: , and for y-values: $192.9 \%$ $238.4 \%$
C) for x-values: , and for y-values: $144.0 \%$ $192.9 \%$
D) for x-values: , and for y-values: $116.5 \%$ $238.4 \%$
E) for x-values: , and for y-values: $192.9 \%$ $144.0 \%$