Question
Rate of Return Scenario Probability Stocks Bonds Recession .20 3 % +18 % Normal economy .60 +19 +9 Boom .20 +28 +5 Consider a portfolio
| Rate of Return | |||||
| Scenario | Probability | Stocks | Bonds | ||
| Recession | .20 | 3 | % | +18 | % |
| Normal economy | .60 | +19 | +9 | ||
| Boom | .20 | +28 | +5 | ||
| Consider a portfolio with weights of .6 in stocks and .4 in bonds. |
| a. | What is the rate of return on the portfolio in each scenario? (Do not round intermediate calculations. Round your answers to 1 decimal place.) |
| Scenario | Rate of Return |
| Recession | % |
| Normal economy | % |
| Boom | % |
| b. | What are the expected rate of return and standard deviation of the portfolio? (Do not round intermediate calculations. Round your answers to 2 decimal places.) |
| Expected rate of return | % |
| Standard deviation | % |
| c. | Which investment would you prefer? |
multiple choice
|
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Strategic Public Finance
Authors: Stephen Bailey
1st Edition
0333922212, 978-033392221
