Problem:
You are considering an investment scenario where stocks will return -5% in a recession, +15% in a normal economy and +25% in a boom economy. Bonds will return +14% in a recession, +8% in a normal economy and +4% in a boom. There is a 20% probability of a recession, a 60% probability of a normal economy and a 20% prbabiliy of a boom.
Required:
Question: What is the expected rate of return and standard deviation for bonds?
Note: Provide specific examples to support your answers.