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Consider the following scenario analysis: Scenario Recession Normal economy Boom Probability 0.20 0.40 0.40 Rate of Return Stocks Bonds -4% 19% 20% 9% 26% 8%

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Consider the following scenario analysis: Scenario Recession Normal economy Boom Probability 0.20 0.40 0.40 Rate of Return Stocks Bonds -4% 19% 20% 9% 26% 8% a. Is it reasonable to assume that Treasury bonds will provide higher returns in recessions than in booms? O NO 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 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 Return Standard Deviation Stocks % % Bonds % %

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