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Scenario Analysis. Consider the following scenario analysis. C. What investment would you prefer? (Choose between more risk averse, less risk averse, and risk netral) Stock
Scenario Analysis. Consider the following scenario analysis.
C. What investment would you prefer? (Choose between more risk averse, less risk averse, and risk netral)
Stock | Bond |
Scenario Recession Normal economy Boom Probability 0.20 0.50 0.30 Rate of Return Stocks Bonds -6% 17% 20% 8% 29% 6% a. Is it reasonable to assume that Treasury bonds will provide higher returns in recessions than in booms? O No O Yes b. Calculate the expected rate of return and standard deviation for each investment. (Do not round intermediate calculations. Enter your answers as a percent rounded to 1 decimal place.) Expected Rate of Return Standard Deviation % Stocks Bonds % %
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