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Consider the following scenario analysis: Rate of Return Scenario Probability Stocks Bonds Recession 0.3 -6 %...

Consider the following scenario analysis:

Rate of Return
Scenario Probability Stocks Bonds
Recession 0.3 -6 % 14 %
Normal economy 0.6 15 11
Boom 0.1 24 5

Assume a portfolio with weights of 0.60 in stocks and 0.40 in bonds.

a. What is the rate of return on the portfolio in each scenario? (Enter your answer as a percent rounded to 1 decimal place.)

b. What are the expected rate of return and standard deviation of the portfolio? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

c. Would you prefer to invest in the portfolio, in stocks only, or in bonds only? Explain the benefit of diversification.

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