8(A). You plan to invest $1,000 in a corporate bond fund or in a common stock fund. The information to the right about the annual return (per $1,000) of each of these investments under different economic conditions is available, along with the probability that each of these economic conditions will occur. Complete parts (a) through (c) below.

**Probability**

**Economic condition**

**Corporate bond fund**

**Common stock fund**

0.01

Extreme recession

-200

-999

0.09

Recession

-40

-300

0.20

Stagnation

20

-50

0.35

Slow growth

80

50

0.20

Moderate growth

100

200

0.15

High growth

120

350

**a.** Compute the expected return for the corporate bond fund and for the common stock fund.

The expected return for the corporate bond fund is

.

(Round to two decimal places as needed.)

The expected return for the common stock fund is

.

(Round to two decimal places as needed.)

**b.** Compute the standard deviation for the corporate bond fund and for the common stock fund.

The standard deviation for the corporate bond fund is

.

(Round to two decimal places as needed.)

The standard deviation for the common stock fund is

.

(Round to two decimal places as needed.)

**c.** Would you invest in the corporate bond fund or the common stock fund?

Explain.Based on the expected value, the

▼(a) common stock (b)corporate bond fund.

Since the standard deviation for the common stock fund is

▼(a) about the same as (b)more than three times greater than (c) less than half as much as

that for the corporate bond fund, the common stock fund

▼(a)has the same risk as (b)is riskier than (c)is safer than

the corporate bond fund and an investor

▼(a)should carefully weigh (b) doesn't need to consider

the risk when making a decision.

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