Question

Check my work mode: This shows what is correct or incorrect for the work you have completed so far. It does not indicate 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 calculation your answers as a percent rounded to 1 decimal place.) Answer is complete but not entirely correct. Expected Rate of Standard Return Deviation 16.4% % 10.3 % 100 x 439 Stocks Bonds < Prev 16 of 17 Next >

Answer 1

Expected return =

P*R

Where P = probability

R = rate of return

expected rate of Probability stocks(s) bonds(b) return of stock(s") 0.2 -5 14 0.6 158 0. 2 25 Total expected rate of return of bond(b") p*(s-s')^2 p*(b-b")^2 2.8 2.8 64.8 6.272 4.8 2.4 0.096 0.8 28.8 3.872 8.40 96.00 10.24 13.00

From the above information

Expected return of stocks = 13

bonds = 8.40

Standard deviation =

P*(X - X°)2

where , P = probability

X = return with respect to probability

X' = expected return

form the above information

Standard deviation of Stocks = (96)^1/2 = 9.80

bonds = (10.24)^1/2 = 3.2