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Consider the following scenario analysis: Scenario Recession Normal economy Boom Rate of Return Probability 0.2 Stocks -5% Bonds 17% 0.6 18 11 0.2 24

Consider the following scenario analysis: Scenario Recession Normal economy Boom Rate of Return Probability 0.2 Stocks -5% Bonds 17% 0.6 18 11 0.2 24 4 Assume a portfolio with weights of 0.60 in stocks and 0.40 in bonds. a. What is the rate of return on the portfolio in each scenario? b. What are the expected rate of return and standard deviation of the portfolio?

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