#3 You plan to invest $1,000 in a corporate bond fund or in a common stock fund. The information to the right about the annual return (per $1,000) of each of these investments under different economic...

Extracted text: #3 You plan to invest $1,000 in a corporate bond fund or in a common stock fund. The information to the right about the annual return (per $1,000) of each of these investments under different economic conditions is available, along with the probability that each of these economic conditions will occur. Complete parts (a) through (c) below. Economic Probability Condition 0.01 Corporate Bond Fund Extreme recession - 250 - 60 Common Stock Fund - 999 - 300 0.09 Recession 0.20 0.30 0.35 Stagnation Slow growth Moderate growth High growth 30 80 90 110 - 150 150 200 350 0.05 a. Compute the expected return for the corporate bond fund and for the common stock fund. b. Compute the standard deviation for the corporate bond fund and for the common stock fund. c. Would you invest in the corporate bond fund or the common stock fund? Explain. Based on the expected value, the the standard deviation for the common stock fund is --- (about the same as/less than half as much as/more than three times greater than) that for the corporate bond fund, the common stock fund --- (has the same risk as/is safer than/is riskier than) the corporate fund and an investor -- (should carefully weight/doesn't need to consider) the risk when making a decision. (corporate bond/common stock) fund should be chosen. Since Show transcribed image text