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Consider the following scenario analysis: Rate of Return Scenario Probability Stocks Bonds Recession .20 7 % 20 % Normal economy .60 22 11 Boom .20
Consider the following scenario analysis: |
Rate of Return | |||||
Scenario | Probability | Stocks | Bonds | ||
Recession | .20 | 7 | % | 20 | % |
Normal economy | .60 | 22 | 11 | ||
Boom | .20 | 33 | 7 |
a. | Is it reasonable to assume that Treasury bonds will provide higher returns in recessions than in booms? | ||
|
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.) |
Expected Rate of Return | Standard Deviation | |
Stocks | % | % |
Bonds | % | % |
|
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