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Consider the following scenario analysis: Scenario Recession Normal economy Boom Probability 0.20 0.50 0.30 Rate of Return Stocks Bonds -8% 19% 20% 10% 25% 6%
Consider the following scenario analysis: Scenario Recession Normal economy Boom Probability 0.20 0.50 0.30 Rate of Return Stocks Bonds -8% 19% 20% 10% 25% 6% a. Is it reasonable to assume that Treasury bonds will provide higher returns in recessions than in booms? O No O Yes 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 Standard Deviation Return Stocks % % % % Bonds c. Which investment would you prefer? Stock Bond Which investment would you prefer
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