Problem 11-18 Portfolio Analysis (LO2)

Consider the following scenario analysis:

		Rate of Return
Scenario	Probability	Stocks		Bonds
Recession	0.3	-6	%	14	%
Normal economy	0.6	15		11
Boom	0.1	24		5

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

b. What are the expected rate of return and standard deviation of the portfolio?

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Picture for reference

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Please explain in details, thank you.

Consider the following scenario analysis Rate of Return Scenario Recession Normal economy Boom Probability StocksBonds 14% 0.3 0.6 6% 15 24 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.) Rate of Return Recession Normal economy Boom 2.01% Question A is already solved 13.41% 16.41% b. What are the expected rate of return and standard deviation of the portfolio? (Enter your answer as a percent rounded to 2 decimal places.) 10.281% Expected return Standard deviation