Question: Problem 11-18 Portfolio Analysis (LO3) Consider the following scenario analysis: Rate of Return Scenario Probability Stocks Bonds Recession 0.2 -5 % 13 % Normal economy

Problem 11-18 Portfolio Analysis (LO3)

Consider the following scenario analysis:

		Rate of Return
Scenario	Probability	Stocks		Bonds
Recession	0.2	-5	%	13	%
Normal economy	0.7	14		10
Boom	0.1	25		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.)

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