Consider the following scenario analysis Probability Stocks

Consider the following scenario analysis: Probability Stocks Bonds 14% 0.20 9.60 0.20 5% 15 25 Recession Normal economy Boom Assume a portfolio with weights of 60 in stocks and 40 in bonds on the portfolio in each scenario? (Do not round intermediate calculations. Enter your answer asa percent rounded to 1 decimal place.) Rate of Return Normal economy Born 12 21% 1661

Solution

standard deviation = square root ( sum of the last column) = 4.61%

p(x)	return	p*x	p*(x - mean)^2
0.2	2.6%	0.0052	0.0014655
0.6	12.2%	0.0732	0.0000649
0.2	16.6%	0.0332	0.0005919