Consider the following scenario analysis:

Rate of Return

Scenario Probability Stocks Bonds

Recession 0.30 8% 21%

Normal economy 0.50 22% 9%

Boom 0.20 32% 9%

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

• No
• Yes

b.Calculate the expected rate of return and standard deviation for each investment.(Do not round intermediate calculations. Enter your answers as a percent rounded to 1 decimal place.)

c.Which investment would you prefer?