Problem - Portfolio Analysis Assume Deniz constructs a portfolio with weights of 0.60 in stocks and 0.40 in bonds. There is a 0.2 chance that a recession will occur, with stocks earning a -7% return and bonds earning a 15% return. There is a 0.7 chance that the economy will return to normal, in which case stocks will return 16% and bonds would return 7%. Finally, there is a 0.1 chance that a boom will occur, in which case equities will gain 25% and bonds will yield 6%. Rate of Return Scenario Probability Stocks Bonds Recession 0.2 -78 158 Normal economy 0.7 168 Boom 0.1 258 68 73 a. Calculate the rate of return on Deniz's portfolio in each scenario? (Enter your answer as a percent rounded to 1 decimal place.) Rate of Return % % Recession Normal economy Boom % b. Calculate the expected rate of return and the standard deviation of Deniz's portfolio. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) a % % Expected return Standard deviation Next Prey 4 of 4 !!! MacBook Air