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What is the rate of return on the portfolio in scenario

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Reference no: EM132491164

Consider the following scenario analysis: 
Rate of ReturnScenario Probability Stocks Bonds
Recession 0.2 -7% 13%
Normal economy 0.5 14 9 
Boom 0.3 27 4 

Assume a portfolio with weights of 0.60 in stocks and 0.40 in bonds.

a. What is the rate of return on the portfolio in each scenario? (Enter your answer as a percent rounded to 1 decimal place.) 

b. What are the expected rate of return and standard deviation of the portfolio? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

c. Would you prefer to invest in the portfolio, in stocks only, or in bonds only? Explain the benefit of diversification. 

Reference no: EM132491164

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