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Consider the following scenario analysis: Rate of Return Scenario Probability Stocks Bonds Recession 0.20 –5 % 19 % Normal economy 0.70 20 10 Boom 0.10 32 9 a. Is it reasonable to assume that Treasury bonds will provide higher returns in recessions than in booms? No Yes 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.)

Table for B

Expected Rate of Return Standard Deviation

Stocks (%)

Bonds (%)

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Financial Management, Finance

Category:- Financial Management
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