Question: Problem 11-13 Scenario Analysis (LO2) Consider the following scenario analysis: Scenario Recession Normal economy Probability 0.30 0.60 0.10 Rate of Return Stocks Bonds -5% 18%

Problem 11-13 Scenario Analysis (LO2) Consider the following scenario analysis: Scenario

Problem 11-13 Scenario Analysis (LO2) Consider the following scenario analysis: Scenario Recession Normal economy Probability 0.30 0.60 0.10 Rate of Return Stocks Bonds -5% 18% 19% 7% 24% 7% Boom a. Is it reasonable to assume that Treasury bonds will provide higher returns in recessions than in booms? O No O 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.) Standard Deviation Stocks Expected Rate of Return % % % Bonds % c. Which investment would you prefer? Stock Bond Which investment would you prefer

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