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Consider the following scenario analysis: Scenario Probability Rate of Return Stocks Bonds Recession 0.3 6% 14% Normal economy 0.6 15 11 Boom 0.1 24 5
Consider the following scenario analysis:
Scenario | Probability | Rate of Return | |
---|---|---|---|
Stocks | Bonds | ||
Recession | 0.3 | 6% | 14% |
Normal economy | 0.6 | 15 | 11 |
Boom | 0.1 | 24 | 5 |
Assume a portfolio with weights of 0.60 in stocks and 0.40 in bonds.
- What is the rate of return on the portfolio in each scenario?
- What are the expected rate of return and standard deviation of the portfolio?
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