Consider the following scenario analysis: Rate...
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Accounting
Consider the following scenario analysis:
| Rate of Return | |||||
| Scenario | Probability | Stocks | Bonds | ||
| Recession | 0.20 | 4 | % | 19 | % |
| Normal economy | 0.40 | 20 | % | 9 | % |
| Boom | 0.40 | 26 | % | 8 | % |
a. Is it reasonable to assume that Treasury bonds will provide higher returns in recessions than in booms?
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No
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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.)
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