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Consider the following scenario analysis: Scenario Recession Normal economy Boom Rate of Return Probability 0.20 Stocks Bonds -5% 17% 0.50 20% 9% 0.30 29%
Consider the following scenario analysis: Scenario Recession Normal economy Boom Rate of Return Probability 0.20 Stocks Bonds -5% 17% 0.50 20% 9% 0.30 29% 7% 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.
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