Question: Consider the following scenario analysis: 5 Scenario Recession Normal economy Boom Probability 0.20 0.60 0.20 Rate of Return Stocks Bonds -5% 19% 20% 10% 27%

Consider the following scenario analysis: 5 Scenario Recession Normal economy Boom

Consider the following scenario analysis: 5 Scenario Recession Normal economy Boom Probability 0.20 0.60 0.20 Rate of Return Stocks Bonds -5% 19% 20% 10% 27% 4% 1.76 points a. Is it reasonable to assume that Treasury bonds will provide higher returns in recessions than in booms? O No O 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 Return Standard Deviation Stocks % % Bonds % c. Which investment would you prefer? Stock Bond Which investment would you prefer

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