Consider the following scenario analysis: Scenario Recession Normal economy Boom Probability 0.20 0.60 0.20 Required A Required B Rate of Return Stocks -6% 19% 30% 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? Required C Bonds 17% Complete this question by entering your answers in the tabs below. 9% 5%

Consider the following two scenarios for the economy and the expected returns in each scenario for the market portfolio, an eggressive stock A, and a defensive stock D. Required; a. Find the beta of each stock. b. If each scenario is equally likety, find the expected rate of return on the market portfollo and on each stock. c. If the T-bill rate is 5%, what does the CAPM say about the fair expected rate of return on the two stocks? d. Which stock seems to be a better buy on the basis of your answers to (o) through (c)? Complete this question by entering vour answers in the tabs below. If each scenario is equelly wely, find the expected rate of return on the market portfolio and on each Mock. Note: Enter your answers as a whale percent