Consider the following scenerio analysis:
Scenerio Probability Stocks Bonds
Recession .20 -6% 17%
Normal Economy .60 19 9
Boom .20 30 5
a) Is it reasonable to assume that Treasury bonds will provide higher returns in recessions than in booms?
b)Calculate the expected rate of return and standard deviation for each investment.
Expected Rate of Return Standard Deviation
Stocks ?% ?%
Bonds ?% ?%