Consider the following scenario analysis: Scenario Recession Required A Probability 0.3 Normal economy Boom Assume a portfolio with weights of 0.60 in stocks and 0.40 in bonds. a. What is the rate of return on the portfolio in each scenario? b. What are the expected rate of return and standard deviation of the portfolio? Required B Expected return Standard deviation Rate of Return Stocks -4% 13 22 0.4 0.3 Complete this question by entering your answers in the tabs below. Bonds 12% 7 3 What are the expected rate of return and standard deviation of the portfolio? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal pla % %

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Consider the following scenario analysis:
Scenario
Recession
Normal economy
Boom
Required A
Probability
0.3
0.4
0.3
Assume a portfolio with weights of 0.60 in stocks and 0.40 in bonds.
a. What is the rate of return on the portfolio in each scenario?
b. What are the expected rate of return and standard deviation of the portfolio?
Rate of Return
Stocks
Bonds
12%
7
3
Complete this question by entering your answers in the tabs below.
Required B
Expected return
Standard deviation
-4%
13
22
What are the expected rate of return and standard deviation of the portfolio?
Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places
%
%
Transcribed Image Text:Consider the following scenario analysis: Scenario Recession Normal economy Boom Required A Probability 0.3 0.4 0.3 Assume a portfolio with weights of 0.60 in stocks and 0.40 in bonds. a. What is the rate of return on the portfolio in each scenario? b. What are the expected rate of return and standard deviation of the portfolio? Rate of Return Stocks Bonds 12% 7 3 Complete this question by entering your answers in the tabs below. Required B Expected return Standard deviation -4% 13 22 What are the expected rate of return and standard deviation of the portfolio? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places % %
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