Consider the following scenario analysis:

Rate of Return

Scenario Probability Stocks Bonds

Recession 0.20 -5% 14%

Normal economy 0.60 15 8

Boom 0.20 25 4

Assume a portfolio with weights of .60 in stocks and .40 in bonds.

a.What is the rate of return on the portfolio in each scenario?

Rate of Return

Recession ______%

Normal economy _______%

Boom _______%

b.What are the expected rate of return and standard deviation of the portfolio?

Expected return ________%

Standard deviation ______%