Purchase Solution

Return on Stocks and Bonds

Not what you're looking for?

Ask Custom Question

1) SCENARIO ANALYSIS: Consider the following scenario analysis;
Scenario Probability Stock Bonds
Recession .20 -5% +14%
Normal economy .60 +15 +8%
Boom .20 +25 +4%

a)  Is it reasonable to assume that Treasury bonds will provide higher returns in recession than in booms?  Why?
b)  Calculate the expected rate of return and standard deviation for each investment.        
c)  Which investment would you prefer?

2) PORTFOLIO ANAYSIS: using the data in the problem above and considering a portfolio with weights of .60 in stocks and .40 in bonds.
a.What is the rate of return on the portfolio in each scenario?
b.What is the expected rate of return and standard deviation of the portfolio?
c. Would you prefer to invest in the portfolio, in stocks only, or in bonds only,

Purchase this Solution
Solution Summary

The expected rate of return and standard deviation for investment in bonds and stocks is calculated, given the probability distribution of return.

Purchase this Solution
Free BrainMass Quizzes
Motivation

This tests some key elements of major motivation theories.

Lean your Process

This quiz will help you understand the basic concepts of Lean.

Situational Leadership

This quiz will help you better understand Situational Leadership and its theories.

IPOs

This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)

Business Ethics Awareness Strategy

This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.

View More Free Quizzes
Related BrainMass Solutions

  • The solution to Return on stocks and bonds

    The expected rate of return and standard deviation for investment in a portfolio of bonds and stocks is calculated, given the probability distribution of return on bonds and stocks.

  • Expected return and standard deviation of portfolio

    The solution calculates the expected rate of return and standard deviation of a portfolio composed of bonds and stocks, given probability distribution of return on stocks and bonds.

  • Scenario & Portfolio Analysis for a Return on Stocks and Bonds

    The expected rate of return and standard deviation for investment in bonds and stocks is calculated, given the probability distribution of return.

  • Impact of the Sarbanes-Oxley Act

    Therefore, if the new projects that will be funded by the stocks or bonds do not have an estimated return over the current average ROA, it will likely be denied. Return on equity Issuing stocks will increase total assets and total equity.

  • Historical trends for small capitalization stocks

    Below common stocks and below long-term government bonds. c. Above last year's return on the same stocks. d. Above common stock, long-term government, and corporate bonds. e. The least variable among long-term bonds and common stocks. d.

  • Investment in bonds and stocks

    24341 What type of investor would benefit most from stocks? From bonds? Following is a good comparison of stocks and bonds.

  • Multiple Choice Questions

    on market portfolio= r m = to be determined required return on stock r A = 14.00% Plugging in the values r m = 11.% =(14.%-5.%)/1.5+5.% Calculates price of bonds, a bond's annual coupon rate, required rate of return on the stock market

  • US Capital Market- Return and Risk on Securities

    Standard deviation for small company stocks @ 32.9% were the highest. Answer to question on the smallest average annual return, and greatest standard deviation (total risk) of returns for securities in the U.S. capital market.

  • Expected rate of return and standard deviation

    Use the data in the previous problem and consider a portfolio with weights of .60 in stocks and .40 in bonds. a. What is the rate of return on the portfolio in each scenario? b.

View More Related Solutions