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Calculate expected rate of return and standard deviation

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Reference no: EM132491158

Consider the following scenario analysis:

Rate of

Return
Scenario Probability Stocks Bonds

Recession 0.30 -8% 21%

Normal economy 0.50 22% 9%

Boom 0.20 32% 9%

a. Is it reasonable to assume that Treasury bonds will provide higher returns in recessions than in booms?

No

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.)

c. Which investment would you prefer?

Reference no: EM132491158

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