5 1.76points ItemSkipped Item 5 Consider the following scenario analysis: ...
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Accounting
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Item 5
Consider the following scenario analysis:
|
|
| Rate of Return | |||
| Scenario | Probability | Stocks | Bonds | ||
| Recession | 0.20 | 6 | % | 18 | % |
| Normal economy | 0.50 | 19 | % | 11 | % |
| Boom | 0.30 | 26 | % | 8 | % |
a. Is it reasonable to assume that Treasury bonds will provide higher returns in recessions than in booms?
multiple choice
- 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.)
c. Which investment would you prefer?
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