You plan to invest $1,000 in a corporate bond fund or in a common stock fund. The following table presents the annual return (per $1,000) of each of these investments under various economic conditions and the probability that each of those economic conditions will occur.

Calculate the

a. Expected return for the corporate bond fund and for the common stock fund.

b. Standard deviation for the corporate bond fund and for the common stock fund.

c. Would you invest in the corporate bond fund or the common stock fund? Explain.

d. If you chose to invest in the common stock fund in (c), what do you think about the possibility of losing $999 of every $1,000 invested if there is an extreme recession?

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Probability 0.01 0.09 0.15 0.35 0.30 0.10 Economic Condition Extreme recession Recession Stagnation Slow growth Moderate growth High growth Corporate Bond Fund -300 -70 30 60 100 120 Common Stock Fund -999 -300 -100 100 150 350