Based on the scenario analysis on stocks and bonds, we know the following:
- Treasury bonds will provide a higher return in a recession than in a boom.
- The expected return of Bonds is 9.8% and that of stocks is 11.6%.
- The standard deviation of Bonds is 9.24% and that of stock is 11.76%.
<h3>What does the scenario analysis on Bonds and Stocks show?</h3>
In a recession, Bond returns will be 15%. This is much higher than Bond returns in a boom of only 5%.
The expected return on bonds will be:
= ∑(Probability of Scenario x Returns in scenario)
= (0.30 x 15%) + (0.60 x 8%) + (0.10 x 5%)
= 9.8%
The expected return on stocks will be:
= (0.30 x -6%) + (0.60 x 18%) + (0.10 x 26%)
= 11.6%
Using a spreadsheet, you can input the expected returns of the stocks and the bonds to find the standard deviation to be 9.24% and 11.76%, respectively.
Find out more on stock expected returns at brainly.com/question/18724022.
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Answer:
Explanation:
7
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5
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9
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2
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1
2
7y+5x-9+2y-12x
7y+5x−9+2y−12x
Simplify
1
Combine like terms
7
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5
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9
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2
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1
2
{\color{#c92786}{7y}}+5x-9+{\color{#c92786}{2y}}-12x
7y+5x−9+2y−12x
9
+
5
−
9
−
1
2
{\color{#c92786}{9y}}+5x-9-12x
9y+5x−9−12x
2
Combine like terms
3
Rearrange terms
Solution
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7
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9
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9
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