3) Consider the following scenario analysis and rates of returns generated under each scenario: Scenario Probability Stock Treasury bills Recession 1/4 -2% +10% Normal 1/2 +10 +4 Boom 1/4 +22 +2 a) Calculate the expected rate of return on standard deviation for each investment? (4 pts) b) Suppose you create a portfolio with weights of 0.80 in stocks and 0.20 in bonds. What are the expected rate of return and standard deviation of the portfolio? (4 pts) c) Would you prefer to invest in the portfolio, in stocks only, or in bonds only? Explain the benefit of diversification. (2 pts)