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1. Consider the following scenario analysis: Rates of Return Scenario Probability Stocks Bonds Recession 0.25 -14% 6% Normal 0.50 18% 2% Boom 0.25 22% -2%

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1. Consider the following scenario analysis: Rates of Return Scenario Probability Stocks Bonds Recession 0.25 -14% 6% Normal 0.50 18% 2% Boom 0.25 22% -2% a. Is it reasonable to assume that Treasury bonds will provide higher returns in recessions than in booms? b. Calculate the expected rate of return and standard deviation for each investment. C. Which investment would you prefer? 1. Consider the following scenario analysis: Rates of Return Scenario Probability Stocks Bonds Recession 0.25 -14% 6% Normal 0.50 18% 2% Boom 0.25 22% -2% a. Is it reasonable to assume that Treasury bonds will provide higher returns in recessions than in booms? b. Calculate the expected rate of return and standard deviation for each investment. C. Which investment would you prefer

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