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What is the rate of return on the portfolio

Task: Analyze the risk of a portfolio

Use the data below and consider portfolio weights of .60 in stocks and .40 in bonds.

Rate of Return
Scenario    Probability    Stocks    Bonds
Recession    0.2    -5%    14%
Normal      0.6    15%    8%
Boom          0.2    25%    4%

Q1. What is the rate of return on the portfolio in each scenario?

Q2. What is the expected return and standard deviation of the portfolio?

Q3. Would you prefer to invest in the portfolio of stocks only or in bonds only?

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