Question
Rate of Return Scenario Probability Stocks Bonds Recession .40 4 % +19 % Normal economy .50 +20 +9 Boom .10 +26 +8 Consider a portfolio
| Rate of Return | |||||
| Scenario | Probability | Stocks | Bonds | ||
| Recession | .40 | 4 | % | +19 | % |
| Normal economy | .50 | +20 | +9 | ||
| Boom | .10 | +26 | +8 | ||
| 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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Money Banking And Financial Markets
Authors: Lloyd B. Thomas
1st International Edition
0070644365, 9780070644366
