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What is the expected return of stocks

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Consider the following data for stocks and bonds in the scenario analysis and a portfolio with weights of 50% in stocks and 50% in bonds.

 

 

Rate of Return

Scenario

Probability

Stocks

Bonds

Severe recession

0.05

-37%

-9%

Mild recession

0.25

-11%

15%

Normal growth

0.40

14%

8%

Boom

0.30

30%

-5%

(a) What is the expected return of stocks?

(b) What is the expected return of bonds?

(c) What are the expected return and standard deviation of the portfolio?

Reference no: EM133109610

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