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I need part C. Please indicate whether stock and bond are more risk-averse, less risk-averse, or risk-neutral. Problem 11-13 Scenario Analysis (LO2) Consider the following
I need part C. Please indicate whether stock and bond are more risk-averse, less risk-averse, or risk-neutral.
Problem 11-13 Scenario Analysis (LO2) Consider the following scenario analysis: Scenario Recession Normal economy Boom Probability 0.30 0.60 0.10 Rate of Return Stocks Bonds -6% 15% 18% 8% 26% 5% a. Is it reasonable to assume that Treasury bonds will provide higher returns in recessions than in booms? 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.) Standard Deviation Expected Rate of Return 11.61% Stocks 11.8% 3.5 % Bonds 9.8% c. Which investment would you prefer? Stock Bond Which investment would you prefer? more risk-averse less risk-averse risk-neutralStep by Step Solution
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