Consider the following scenario analysis:

		Rate of Return
Scenario	Probability	Stocks		Bonds
Recession	0.3	-4	%	12	%
Normal economy	0.4	13		7
Boom	0.3	22		3

Assume a portfolio with weights of 0.60 in stocks and 0.40 in bonds.

a. What is the rate of return on the portfolio in each scenario? (Enter your answer as a percent rounded to 1 decimal place.)

b. What are the expected rate of return and standard deviation of the portfolio? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

c. Would you prefer to invest in the portfolio, in stocks only, or in bonds only? Explain the benefit of diversification.