Question: Problem 11-13 Scenario Analysis (LO2) Consider the following scenario analysis: Scenario Recession Normal economy Boom Probability 0.20 0.70 0.10 Rate of Return Stocks Bonds 21%

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 Boom Probability 0.20 0.70 0.10 Rate of Return Stocks Bonds 21% 22% 9% 25% 5% 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.) Expected Rate of Standard Deviation Return % % Stocks Bonds % c. Which investment would you prefer? Stock Bond Which investment would you prefer

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