Question
- Rate of return Scenario Probability Stocks Bonds Recession 0.25 -8% 13% Normal 0.35 15% 8% Boom 0.40 30% 5% Assume the portfolio with weights
- Rate of return
| Scenario | Probability | Stocks | Bonds |
| Recession | 0.25 | -8% | 13% |
| Normal | 0.35 | 15% | 8% |
| Boom | 0.40 | 30% | 5% |
Assume the portfolio with weights of 60% in stock and 40% in bonds
1.What are the rates of return on the portfolio in each scenario?
2.What are the expected rate of return and standard deviation of the portfolio?
3.Explain with reason what investment you would invest, i.e. in the portfolio, in stocks only, or in bonds only?
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Valuation Measuring and managing the values of companies
Authors: Mckinsey, Tim Koller, Marc Goedhart, David Wessel
5th edition
978-0470424650, 9780470889930, 470424656, 470889934, 978-047042470
