Consider the following scenario analysis:

1. Is it reasonable to assume that Treasury bonds will provide higher returns in recessions than in booms?

2. Calculate the expected rate of return and standard deviation for each investment.

3. Which investment would you prefer?

Rates of Return Scenario Probability Stocks Bonds Recession 0.25 -14% 6% Normal 0.50 18% 2% Boom 0.25 22% -2%