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Rate of Return Scenario Probability Stocks Bonds Recession .20 5 % +19 % Normal economy .60 +20 +10 Boom .20 +27 +4 Consider a portfolio
Rate of Return | |||||
Scenario | Probability | Stocks | Bonds | ||
Recession | .20 | 5 | % | +19 | % |
Normal economy | .60 | +20 | +10 | ||
Boom | .20 | +27 | +4 | ||
Consider a portfolio with weights of .7 in stocks and .3 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? | ||||||
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