The following information applies to Question 7 and Question 8

You expect there is an equal chance that there will be a recession next year, the economy will be normal or there will be a boom on the economy. You hold 2/3 of your portfolio in stocks, and 1/3 of your portfolio in bonds. The expected returns depending on the economy are given below:

Expected returns
Scenario	Probability	Stock (S)	Bond (B)
Recession	33.33%	-8.00%	9.00%
Normal	33.33%	12.00%	4.00%
Boom	33.33%	25.00%	-5.00%

The expected standard deviation for your portfolio is:

(You will need to do several steps to get the answer to this question – i.e. calculated the Standard Deviation for S and B and the covariance of returns)

Answer rating: 100% (QA)

The expected standard deviation for your portfolio is 1134 To calculate ... View the full answer