Suppose that in 2022, there are three possible growth rates for the US economy: high, normal, low. Suppose that the three scenarios are equally likely to occur. Further assume that the return on the stock market during the year will be 21%, 5%, and -5% respectively in these three scenarios, and the return on the 10-year T-bond will be -2%, 2%, and 6% in these three scenarios. 

What are the standard deviations of stocks' and bonds' returns in 2022? 

What is the correlation coefficient between stocks' and bonds' returns?

Answer rating: 100% (QA)

i We must first determine the expected return and the variance of the return for each scenario in or... View the full answer