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Problem 11-18 Portfolio Analysis (LO2) Consider the following scenario analysis: Scenario Recession Normal economy Boom Rate of Return Probability Stocks Bonds 0.2 -7% 15% 0.7
Problem 11-18 Portfolio Analysis (LO2) Consider the following scenario analysis: Scenario Recession Normal economy Boom Rate of Return Probability Stocks Bonds 0.2 -7% 15% 0.7 16 7 0.1 25 6 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? (Enter your answer as a percent rounded to 1 decimal place.) Rate of Return Recession % % Normal economy Boom % b. What are the expected rate of return and standard deviation of the portfolio? (Enter your answer as a percent rounded to 2 decimal places.) % Expected return Standard deviation %
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