Question
Rate of Return Scenario Probability Stocks Bonds Recession .20 9 % +20 % Normal economy .50 +21 +8 Boom .30 +31 +8 Consider a portfolio
| Rate of Return | |||||
| Scenario | Probability | Stocks | Bonds | ||
| Recession | .20 | 9 | % | +20 | % |
| Normal economy | .50 | +21 | +8 | ||
| Boom | .30 | +31 | +8 | ||
| 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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Contemporary Issues In Behavioral Finance
Authors: Simon Grima
1st Edition
1787698823, 978-1787698826
