Consider the following scenario analysis: Rate of Return Scenario Probability Stocks Bonds Recession 0.30 −5 % 18 % Normal economy 0.60 19 % 7 % Boom 0.10 24 % 7 % b. Calculate the expected rate of return and standard deviation for each investment.
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Consider the following scenario analysis:
Rate of Return | |||||
Scenario | Probability | Stocks | Bonds | ||
Recession | 0.30 | −5 | % | 18 | % |
Normal economy | 0.60 | 19 | % | 7 | % |
Boom | 0.10 | 24 | % | 7 | % |
b. Calculate the expected rate of return and standard deviation for each investment.
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