#8 You plan to invest $1,000 in a corporate bond fund or in a common stock fund. The information to the right about the annual return (per $1,000) of each of these investments under different economic conditions is available, along with the probability that each of these economic conditions will occur. Complete parts (a) through (c) below.

a. Compute the expected return for the corporate bond fund and for the common stock fund.

b. Compute the 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.

Based on the expected value, the _____(corporate bond/common stock) fund should be chosen. Since the standard deviation for the common stock fund is ____ (about the same as/less than half as much as/more than three times greater than) that for the corporate bond fund, the common stock fund ___ (has the same risk as/is safer than/is riskier than) the corporate fund and an investor ___ (should carefully weight/doesn't need to consider) the risk when making a decision.

-999 Common Economic Corporate Stock Probability Condition Bond Fund Fund 0.01 Extreme recession - 250 0.09 Recession - 60 - 300 0.20 Stagnation 30 0.30 Slow growth 150 0.35 Moderate growth 90 200 0.05 High growth 110 350 - 150