Explore BrainMass

Explore BrainMass

    Scenario Analysis

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Consider the following scenario analysis:

    Rate of Return

    Probability Stocks 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 recessions than
    in booms?
    b. Calculate the expected rate of return and standard deviation for each investment.
    c. Which investment would you prefer?

    © BrainMass Inc. brainmass.com February 24, 2021, 2:29 pm ad1c9bdddf

    Solution Preview

    a. Yes. Look at the data the returns for bonds in recession is 14% while that in boom it is only 4%.
    b. Please refer to the attached spreadsheet for the ...