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Consider the following scenario analysis: Scenario Recession Normal economy Boom Rate of Return Probability Stocks Bonds 0.20 -5% 19% 0.70 20% 10% 0.10 32%

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Consider the following scenario analysis: Scenario Recession Normal economy Boom Rate of Return Probability Stocks Bonds 0.20 -5% 19% 0.70 20% 10% 0.10 32% 9% 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. c. Which investment would you prefer? Complete this question by entering your answers in the tabs below. Required A Required B Required C Calculate the expected rate of return and standard deviation for each investment. Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 1 decimal place. Expected Rate of Stocks Bonds Return % Standard Deviation %

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