Consider the following scenario analysis: Rate of Return Scenario Probability Stocks Bonds Recession 0.2 -4 % 15 % Normal economy 0.7 16 11 Boom 0.1 25 3 Assume a portfolio with weights of 0.60 in...

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Finance

Consider the following scenario analysis:
Rate of Return
Scenario Probability Stocks Bonds
Recession 0.2 -4 % 15 %
Normal economy 0.7 16 11
Boom 0.1 25 3
Assume a portfolio with weights of 0.60 in stocks and 0.40 inbonds.
a. What is the rate of return on the portfolioin each scenario? (Enter your answer as a percent roundedto 1 decimal place.)
b. What are the expected rate of return andstandard deviation of the portfolio? (Enter your answer asa percent rounded to 2 decimal places.)

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a Recession Weight of Stocks 06 Weight of Bonds 04 Expected return of Portfolio Weight of StocksExpected return of StocksWeight of BondsExpected return of Bonds Expected return of Portfolio 4061504 Expected return of Portfolio 36 Normal Weight of Stocks 06 Weight of Bonds 04 Expected return of Portfolio Weight of StocksExpected return of StocksWeight of See Answer

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Transcribed Image Text

Consider the following scenario analysis:Rate of ReturnScenarioProbabilityStocksBondsRecession0.2-4%15%Normal economy0.71611Boom0.1253Assume a portfolio with weights of 0.60 in stocks and 0.40 inbonds.a. What is the rate of return on the portfolioin each scenario? (Enter your answer as a percent roundedto 1 decimal place.)b. What are the expected rate of return andstandard deviation of the portfolio? (Enter your answer asa percent rounded to 2 decimal places.)

		Rate of Return
Scenario	Probability	Stocks		Bonds
Recession	0.2	-4	%	15	%
Normal economy	0.7	16		11
Boom	0.1	25		3