Calculate the expected rate of return and standard

Question

Consider the following scenario analysis:

Rate of Return

Scenario Probability Stocks Bonds

Recession 0.20 -4% 16%

Normal economy 0.50 18  9 

Boom 0.30 29  6 

a. Is it reasonable to assume that Treasury bonds will provide higher returns in recessions than in booms?

• No
• 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.)