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Calculate the expected rate of return and standard

Consider the following scenario:

Scenario Probability Stocks Bonds

Recession .20 -7% 20%

Normal Economy .60 22% 11

Boom .20 33 7

a. Is it reasonable to assume that Treasury bonds will provide higher returns in recessions than in booms?

Yes _____

No _____

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.)

Expected rate of return Standard Deviation

Stocks _______% _______%

Bonds _______% _______%

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Finance Basics: Calculate the expected rate of return and standard

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