Rate of Return Scenario Recession Normal economy Probability Stocks Bonds 15% 0.2 -4% 0.7 16 11 Boom 0.1 25 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? (Enter your answer as a percent rounded Rate of Return Recession 0.7 % Normal economy 9.8 % Boom 1.6 % b. What are the expected rate of return and standard deviation of the portfolio? (Do not round intermediate answer as a percent rounded to 2 decimal places.) Expected return Standard deviation
Rate of Return Scenario Recession Normal economy Probability Stocks Bonds 15% 0.2 -4% 0.7 16 11 Boom 0.1 25 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? (Enter your answer as a percent rounded Rate of Return Recession 0.7 % Normal economy 9.8 % Boom 1.6 % b. What are the expected rate of return and standard deviation of the portfolio? (Do not round intermediate answer as a percent rounded to 2 decimal places.) Expected return Standard deviation
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
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Rate of Return
Scenario
Recession
Normal economy
Boom
Probability Stocks
0.2
0.7
0.1
-48
16
25
Bonds
15%
11
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? (Enter your answer as a percent rounded ta
Rate of Return
Recession
0.7 %
Normal economy
9.8 %
Boom
1.6 %
b. What are the expected rate of return and standard deviation of the portfolio? (Do not round intermediate c
answer as a percent rounded to 2 decimal places.)
Expected return
Standard deviation
3.
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