Consider the following scenario analysis:

		Rate of Return
Scenario	Probability	Stocks		Bonds
Recession	0.30	6	%	15	%
Normal economy	0.60	18	%	8	%
Boom	0.10	26	%	5	%

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

multiple choice

• 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?